ANNUAL REPORT & ACCOUNTS 2019 WHO WE ARE WPP IS A CREATIVE TRANSFORMATION COMPANY. WE USE THE POWER OF CREATIVITY TO BUILD BETTER FUTURES FOR OUR PEOPLE, CLIENTS AND COMMUNITIES. STRATEGIC REPORT

Covid-19 2

Chief Executive’s statement 3

At a glance 8

Our business model 9

Investment case 10

Where we are 12

The market 14

Our strategy 16

Delivering on our strategy 18

Jeremy Bullmore’s essay 48

Remembering two industry greats 50

Financial review 52

Sustainability 58

Assessing and managing our risks 80

CORPORATE GOVERNANCE

Chairman’s letter 94

Our Board 96

Our Executive Committee 98

Corporate governance report 100

Sustainability Committee report 107

Nomination and Governance Committee report 108

Audit Committee report 109

Compliance with the Code 112

Compensation Committee report 114

FINANCIAL STATEMENTS

Accounting policies 140

Consolidated financial statements 147

Notes to the consolidated financial statements 152

Company financial statements 182

Notes to the Company financial statements 185

Independent auditor’s report 187

ADDITIONAL INFORMATION

Taskforce on Climate-related Financial Disclosures 196

Other statutory information 198

Five-year summary 201

Information for shareholders 202

To learn more see Financial glossary 204 wpp.com Where to find us 206

WPP ANNUAL REPORT 2019 1 STRATEGIC REPORT

COVID-19

The coronavirus pandemic has touched all our lives. At WPP our first priority is the wellbeing of our people and doing what we can to limit the impact of the virus on society. Our second is continuity of service for our clients. We have thrown ourselves into achieving both objectives.

To ensure the safety of employees and We have also modelled a range of revenue When we come through the current to help reduce transmission, we moved declines resulting from the pandemic and, situation, the world will have been changed to a global policy of managed remote in the most extreme scenarios tested, in ways that we cannot fully anticipate yet. working in mid-March, and at the time of considered further actions that could be But the demand from our clients for the writing approximately 95% of our people taken to mitigate the impact on cash flow creativity and ingenuity possessed by the worldwide are working from home. Across and ensure additional liquidity. people who work at WPP and across our the world, our agencies are providing industry will be greater than ever. I am in NGOs, governments and clients with Most of the content of this Annual Report no doubt about that. communications and other services – often was produced before the outbreak became on a pro bono basis – to help fight Covid-19. the global pandemic it is today, at a very What we do plays a vital role in driving different time for our business and for the and sustaining the wider economic The companies in the strongest financial world as a whole. We debated whether we activity that societies need to function. position will be best placed to protect their should radically change the report in light Every country will need to stimulate that people, serve their clients and benefit their of this, but decided against it. First, because activity when they move into the shareholders during and beyond this period we want it to stand as an accurate record recovery phase. of deep uncertainty. At the end of March of 2019, and second because we believe we announced a number of measures our strategy remains the correct one. So, while I am concerned about the designed to minimise the impact of any wellbeing of our people, I am confident downturn on our employees and ensure The changes we have made in WPP over in the future of WPP. the Company is well prepared to weather the last year or so have made the Company the storm. more resilient and more future-facing. We I would like to take this opportunity have fewer, stronger agency brands, and to express my deep gratitude for the First, we suspended our share buyback a much simpler structure that is easier for extraordinary effort, resilience and scheme and our 2019 final dividend so that clients to navigate and easier for us to kindness of WPP employees all over the our balance sheet and cash position are manage. We have significantly reduced our world, whose support for one another as healthy as possible. Second, the WPP debt through the sale of a majority stake in and commitment to their clients has Board and Executive Committee took a Kantar, meaning we are in a much stronger been truly inspirational. I am very proud voluntary 20% cut in their fees or salary financial position than we were when I of all of them. for an initial period of three months. became CEO. And we are committed to our And third, we began a comprehensive vision of WPP as a creative transformation Mark Read programme of cost reduction and cash company that brings together human 29 April 2020 conservation measures. brilliance and technological expertise to deliver results for our clients. The events of recent weeks and months call for us to accelerate rather than slow the pace of our own transformation.

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CHIEF EXECUTIVE’S STATEMENT

In 2019 we made good progress in implementing our new strategy for WPP.

“  I AM MORE CONFIDENT We presented the strategy in December Our clients are our lifeblood, and we THAN EVER OF THE 2018. Our vision was to become a creative placed them at the centre of every part transformation company, one that combined of our strategy: ENDURING DEMAND outstanding human talent and imagination FOR OUR SERVICES.” with expertise in technology and data, and –– a new vision and contemporary offer to behaved not as a financial conglomerate or meet the needs of modern marketing; group of separate businesses, but as a –– increased investment in creativity, the unified whole. spark that makes for truly great work; –– harnessing our strengths in data and We defined a new purpose – to use the technology, including our unique power of creativity to build better futures partnerships with the world’s leading for our people, clients and communities. technology firms, for the benefit of clients; –– a simpler structure that makes it easier for And we set new financial targets to allow our clients to understand and access our us to invest in the long-term health of our talent and resources; and business and deliver sustainable growth –– investment in our culture, to ensure WPP for our shareholders. and our agencies are the natural home for the industry’s brightest talent.

We describe our progress in each of these areas from page 18 but, in summary, we were encouraged by the positive momentum within the business in 2019.

WPP ANNUAL REPORT 2019 3 STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT

“  WE WANT OUR PEOPLE A FOUNDATIONAL YEAR PLATFORM FOR GROWTH TO FEEL PROUD TO BE 2019 was the foundational year for our new We have made a number of major strategy – one in which we stabilised and structural changes within WPP to set PART OF WPP.” began to rejuvenate the Company. We said us up for future success. we would begin the journey to return WPP to growth, simplify our business and reduce The mergers announced in the second our debt and, thanks to the hard work of our half of 2018 that created our two newest people all around the world, we met each agencies – VMLY&R and Wunderman of these goals. Thompson – were finalised during 2019. We now have fewer, stronger agency That said, WPP began to under-perform its brands that are better positioned to grow. peers in the first quarter of 2017. From the outset we said it would take time to return We announced the sale of 60% of Kantar the Company to sustainable growth, and to Bain Capital in July 2019 and completed progress towards that goal would not be the majority of the transaction in December, linear. 2019 was the first of a three-year earlier than expected. The disposal achieved turnaround plan and, of course, the our objective of strengthening our balance coronavirus pandemic has subsequently sheet by reducing debt to the lower end had its own major impact. of the target range.

Organic growth1 in 2019 was -1.6% (-1.2% The new partnership with Bain Capital including Kantar), in line with the guidance means that we will benefit from the future we provided in December 2018. The second growth of Kantar, and our clients will half was stronger than the first, with continue to benefit from its services. performance improving globally and in the United States, our largest market. It was a successful year for new business, reflecting clients’ positive reaction to our Headline operating margin was 14.4%, new approach. Just as importantly, we down 1.2 margin points like-for-like (down retained and grew business with existing 0.9 margin points including Kantar) as a result clients, who place a high value on the of challenges in our specialist agencies and longevity of our relationships and how investment for future growth. deeply we understand their businesses.

Reported profit before tax fell by 21.9%, I am more confident than ever of the reflecting an exceptional gain in 2018 that enduring demand for our services – was not repeated in 2019 and a charge especially as we expand our offer in on the revaluation of financial instruments high-growth areas. Clients continue to seek (versus a credit in 2018). Net working out our ideas, our creativity and our ability to capital improved by £350 million. combine our skills in every discipline – from advertising, media and public relations to Year-end net debt fell from £4.017 billion technology, experience and commerce. in 2018 to £1.540 billion. Few companies are better placed to help clients navigate a dynamic and complex It is clear that the impact of Covid-19 on our marketing landscape. business in the current financial year will be significant but it is not possible at this stage to quantify the depth or duration of that impact. As a result, at the end of March we took the decision to withdraw our guidance for the 2020 financial year.

1 O rganic growth defined as like-for-like revenue less pass-through costs growth. A definition of revenue less pass-through costs can be found on page 205.

4 WPP ANNUAL REPORT 2019 CHIEF EXECUTIVE’S STATEMENT STRATEGIC REPORT

Our people, teams and agencies produce We signed up to the Valuable500, a global work of exceptional quality – work that wins initiative designed to put disability on the AWARDS IN 2019 awards not only for its artistry but, most boardroom agenda, and 12 WPP leaders importantly, for its effectiveness in delivering were named in the HERoes and Yahoo! results for clients. You will find examples Finance list of role models for women throughout this report. and champions of gender diversity.

We welcomed new leaders to many of our We are placing ever‑greater emphasis on agency networks, and we enhanced central the impact of what we do beyond the purely WPP teams such as people, technology and commercial – from our pro bono work for Most effective holding company marketing to provide greater support to our NGOs, charities and international bodies and for the eighth consecutive year operating companies. We also formed WPP’s our social contribution to the phasing out of first Executive Committee, consisting of the single-use plastic within our offices. During leaders of our largest agencies and central the year our carbon emissions per employee corporate functions. fell by 21%, and our use of renewable energy rose to 35%, with all of the electricity we Number one holding company A NEW CULTURE used in the United States purchased from in WARC Effective 100 ranking One of WPP’s most important roles is to be renewable sources. a supportive platform for our agency brands and the brilliant work that they do for our We have established our first Sustainability clients. We want our people to feel proud to Committee at Board level to continue to be part of WPP, as well as the agencies who drive improvements in our environmental employ them directly. and wider sustainability performance. To attract and retain the most talented people, Every WPP workplace should be open, we need to be an organisation that is a 189 inclusive and collaborative: somewhere leader in every sense. Total awards to do your best work, and to make a difference. Having defined our purpose of Our Company has been built by truly great building better futures, we have begun to people, and in 2019 we said goodbye to two pursue that aim with real determination of the greatest. We pay tribute to Lester and clarity. Wunderman and Harold Burson on pages 50 and 51. Both Harold and Lester brought We are investing in WPP Campuses around inspiration, originality and pioneering spirit the world – state-of-the-art buildings that are to the organisations they founded and to 87 great places for our people to work and WPP as a whole. Total awards learn, that bring together our different agencies under one roof, foster cooperation I would like to thank all the amazing people between them and champion creativity. within our Company who carry that spirit forward, and the many thousands of WPP We are working hard to become an ever-more alumni around the world who have played inclusive and diverse organisation, and making their own important part in our success. progress. The proportion of women on our Board has increased from 33% in 2018 to 40% 82 today, and we are aiming for parity soon. Total awards Although we have work to do to meet our commitment to achieve parity at the most senior executive level, women now make up Mark Read 50% of our senior managers, compared to 49% Chief Executive Officer in 2018. We were included in the Bloomberg 29 April 2020 Gender-Equality Index for the second year 89 running, and the 2019 Hampton-Alexander Total awards Review of FTSE Women Leaders placed WPP at 12th in the FTSE 100.

WPP ANNUAL REPORT 2019 5 STRATEGIC REPORT

FIGHTING CORONAVIRUS WITH CREATIVITY

AGENCY MULTIPLE WPP COMPANIES

CLIENT WORLD HEALTH ORGANIZATION

Communication is a critical part of the World Health Organization’s strategy in the fight against Covid-19, as it works with governments, partners and stakeholders to encourage people to stay at home and adopt safe behaviours.

WPP is supporting the WHO on a pro bono basis by producing global and regional public awareness campaigns to help limit the spread of the coronavirus and its impact on society.

The partnership leverages the scale of our global resources, expertise and talent to assist the WHO in directly reaching the public with its life-saving communications. It involves a number of different WPP agencies, including Grey, GroupM, Hogarth, Hill+Knowlton, Inca, Motion Content Group, Ogilvy, Wavemaker and WPP Scangroup.

At the time of writing, global media partners including Al-Jazeera, Amazon, CNBC, CNN, Disney, Fox/National Geographic, Sky, Teads and Verizon (sourced by GroupM and Wavemaker) have donated more than $20 million in media to support this effort.

The work shown here is a film from Grey New York called Five Heroic Acts, which stresses the importance of social distancing.

More examples of what WPP and our companies are doing to help – working with clients, governments and NGOs – can be found on our website, wpp.com.

6 WPP ANNUAL REPORT 2019 STRATEGIC REPORT

WPP ANNUAL REPORT 2019 7 STRATEGIC REPORT

AT A GLANCE

OUR GLOBAL BRANDS AKQA GroupM GTB Ogilvy BCW – Essence Hill+Knowlton Superunion Finsbury – MediaCom Strategies VMLY&R Geometry – Mindshare Hogarth Wunderman Thompson Grey – Wavemaker Landor – Xaxis

KEY FACTS Quoted on the London AND FIGURES 106,000+ 112 Stock Exchange and people countries the New York Stock Exchange Clients include 348 All 30 70 69 of the Fortune of the Dow of the of the Global 500 Jones 30 NASDAQ 100 FTSE 100 £53.1bn £13.2bn £10.8bn Billings* Revenue* Revenue less pass‑through costs* (2018: £53.2bn) (2018: £13.0bn) (2018: £10.9bn)

Gold 0.60tCO2e 35% in the EcoVadis CSR rating Carbon emissions per Electricity purchased for the fifth year in a row person from building from renewable sources* energy use (scope 1 and 2)* (2018: 32%)

(2018: 0.76tCO2e) Leader 40% 50% in the Bloomberg Gender- Women on Women in senior Equality Index for the our Board management* second year in a row (2018: 33%) (2018: 49%) 12th 10th 1.60% in the FTSE 100 Rankings in The Responsibility100 Social investment as a for Women on Boards, Index, which measures percentage of reported Hampton-Alexander the commitment to social, profit before tax* Review 2019 environmental and ethical (2018: 1.35%) objectives of FTSE 100 * Continuing operations, companies with 2018 figures restated.

8 WPP ANNUAL REPORT 2019 STRATEGIC REPORT

OUR BUSINESS MODEL

WPP IS A CREATIVE TRANSFORMATION COMPANY

We build better futures for our We are committed to the principles of sustainability We focus on revenue less pass-through costs as in business, through our assignments for clients, a reflection of top-line performance. Pass-through clients through an integrated our substantial pro bono work and the management costs comprise fees paid to external suppliers offer of communications, of our own operations. We aim to build better where they are engaged to perform part or all of futures not only for our people and clients but our a specific project and are charged directly to clients experience, commerce and wider communities. – predominantly media and data collection costs. technology. Our networks and agencies operate in all major Our people are our most important assets and global markets, offering a range of services across our ability to attract and retain diverse talent WPP is a creative transformation company with four key areas: communications, experience, is a critical element of our competitiveness. a service offering that allows us to meet the commerce and technology. Each of these areas Compensation and incentives are aimed at making present and future needs of our clients. Our is critical to success for modern marketing. WPP a home for the best and brightest, and are business model is client-centric and we leverage aligned with our strategy for growth. Our delivery resource and skills across our internal structures to By bringing them together WPP can meet clients’ model is based on an increasingly flexible cost provide the best possible service. WPP works with needs as they react to the changing marketplace structure, with the use of consultants, freelancers 348 of the Fortune Global 500, all 30 of the Dow and complex social, economic and environmental and incentives allowing the Company to respond Jones 30 and 70 of the NASDAQ 100. pressures, while expanding our own business in to any market volatility. high-growth sectors. Our transformation programme, encompassing Revenues are principally derived from fees for a new vision and offer, a simplified structure services on a rate per hour or per project basis. including a consistent shared service infrastructure Client engagements include fixed-fee contracts, and the development of Campus co-locations, retainer agreements and commissions on media investments in creativity, technology and talent, placements. Some client arrangements include and a new emphasis on building the Company’s performance incentive provisions designed to culture, will enhance WPP’s proposition to link revenue to quantitative and qualitative goals. clients and drive top-line growth.

WPP ANNUAL REPORT 2019 9 STRATEGIC REPORT

INVESTMENT CASE

In an industry undergoing significant change, WPP has distinctive assets and a clearly differentiated strategy for growth.

1 2 3

THE WORLD’S NUMBER MARKET-LEADING UNRIVALLED ONE MARKETING SHARE IN MEDIA GEOGRAPHICAL REACH SERVICES BUSINESS

–– Long-term track record of organic –– Media buying at scale, providing value –– Present in over 100 markets around growth and successful M&A and high-quality inventory to clients the world –– Business model and services –– Ability to deliver integrated –– Attractive combination of well-established, constantly evolving to reflect campaigns globally across traditional highly profitable markets such as the changes in the market and digital platforms United States and UK, and faster-growing –– Extended offer to clients targeting –– Significant source of data and insights economies including India and Brazil high ‑growth areas of experience, to maximise campaign impact –– Good balance of global and local clients commerce and technology

Global client list including 17% 35% 13% 348 of the Fortune 500 of global media-buying market of revenue less of revenue less share (40% in the UK, 13% in the United States) pass -through costs pass -through costs from the United from the UK (2019) and 69 of the FTSE 100 Source: COMvergence States (2019) Market forecast to grow 10% 9% 3-4% annually to 2024 like -for-like growth like -for-like growth Source: GroupM, This Year, Next Year: December 2019 in revenue less in revenue less (pre Covid-19 impact) pass -through costs pass -through costs in India (2019) in Brazil (2019)

10 WPP ANNUAL REPORT 2019 INVESTMENT CASE STRATEGIC REPORT

4 5 6

CLOSE ALIGNMENT TO NEW STRATEGY DRIVING WELL-CAPITALISED THE WORLD’S MAJOR STRUCTURAL AND AND CASH-GENERATIVE GROWTH BUSINESSES CULTURAL CHANGE

–– Technology increasingly driving growth –– Through mergers formed Wunderman –– Disposal programme has simplified in advertising spend and underpinning Thompson and VMLY&R to create fewer, WPP and reduced debt to lower end services to clients stronger agency brands and simplified of target range –– Strategic partnerships with Adobe, the Company with the disposal of –– Continued strong cash generation Alibaba, Facebook, Google, IBM, non-core businesses – easier to manage to fund investment Microsoft, Salesforce and Tencent and a better proposition for clients –– Technology client base growing strongly –– Creating multi-agency Campuses –– Significant West Coast presence worldwide to enhance collaboration and provide a better working environment –– Investing in central WPP teams such as people, technology and marketing & growth to provide greater support to operating companies

10% 75,000 >£3.2bn like -for-like revenue growth from technology of our people in WPP Campuses by 2023 raised from disposals in past two years companies in our top 200 clients (2019) Top three >50 partner for Adobe and Salesforce worldwide disposals and more than 80 non-core business closures in past two years Number one buyer of media on Google and Facebook

WPP ANNUAL REPORT 2019 11 STRATEGIC REPORT

WHERE WE ARE

WPP companies operate in 112 countries. Here we show our presence by region in terms of revenue and headcount.

NORTH AMERICA £4.9BN 23,000

Revenues Denote the collective figure for all LATIN WPP companies in a given region AMERICA or country. £0.7BN People 11,000 Denotes the number of people employed by WPP companies in a given region or country.

As at 31 December 2019.

12 WPP ANNUAL REPORT 2019 WHERE WE ARE STRATEGIC REPORT

WESTERN CENTRAL CONTINENTAL & EASTERN EUROPE EUROPE £2.6BN £0.3BN 21,000 5,000 UNITED KINGDOM £1.8BN 11,000

ASIA PACIFIC £2.6BN 29,000

AFRICA & MIDDLE EAST £0.4BN 6,000

WPP ANNUAL REPORT 2019 13 STRATEGIC REPORT

THE MARKET

Marketing and technology are colliding.

Agencies need strengths Clients want our creativity more than ever, and they are seeking services beyond our 76% in data and technology traditional strengths in communications. of Chief Marketing Officers say – as well as creativity Agencies in the industry perceived to be their decisions are now being lacking in contemporary skills in areas such as driven by data data, technology, experience and commerce Source: Gartner, Annual CMO Spend Survey have come under significant pressure. 2019-2020

TRANSACTIONS Clients need a trusted Every industry, from automotive and packaged goods to drinks and financial partner to navigate services, is facing structural change driven by technology. Organisations are looking to 59% 41% technological disruption agencies to help them navigate this disruption.

Digital In -store Source: Bond Internet Trends 2019

Marketing technologies The alignment of CMOs and CIOs to build and operate marketing technologies brings 14% bring opportunities and new opportunities for our business as well of Chief Marketing Officers now new competition as competition from consultants. Agencies cite IT as a “top supporter” are now promoting their consulting and within their organisations – the technology capabilities more effectively most highly cited department alongside their creative offerings. Source: Gartner, Annual CMO Spend Survey 2019-2020

Competition for top While their direct competitive threat to “OUR PEOPLE the marketing services industry has been WILL DRIVE talent and attention overstated, technology firms are vying OUR STRATEGY.” with agencies for talent and the attention Mark Read of clients. Chief Executive Officer

Trust and transparency New platforms are changing the way people interact with technology. Privacy, data and 64% are paramount security breaches and the issue of fake news of internet users are concerned have damaged trust between organisations about how their personal data is and the public. The industry needs to work being used by companies hard to restore that trust. Source: Global Web Index

14 WPP ANNUAL REPORT 2019 THE MARKET STRATEGIC REPORT

This collision creates significant opportunities for companies like WPP.

WPP is already one of the most Market trends are driving our industry towards high-growth areas. These forward-looking and tech-enabled are reflected in our future-facing offer of communications, experience, companies in our industry. We have commerce and technology (see page 19), each of which is critical to many of the world’s leading creative, data and technology agencies, four of success for modern marketing. which were named as industry leaders in the influential Gartner Magic Quadrant study. We are the largest partner to the world’s leading media and technology companies. We invest almost $7 billion a year with Google ESTIMATED GLOBAL MARKET on behalf of our clients, and almost $3 billion with Facebook.

Our marketing technology operation consists of 7,000 experts worldwide, and we have strong, growing relationships with our clients’ Chief Information Officers, as well as the Chief Marketing Officers. As we increasingly $1tn $600-900bn market market by 2022 put technology at the heart of what we do, we are well positioned to capture the opportunities of the changing market, and to help our clients navigate the technology-driven disruption they are facing. COMMUNICATIONS EXPERIENCE | COMMERCE | TECHNOLOGY 2-3% 5-15% growth growth

Source: GroupM forecast (pre Covid-19 impact)

WPP ANNUAL REPORT 2019 15 STRATEGIC REPORT

OUR STRATEGY

Radical evolution: a strategy for growth

We are one year into When we launched our new strategy in Our strategy focuses on growth. The savings December 2018 we described it as one from restructuring our business will allow us our three-year plan of radical evolution. Radical because we to increase investment in the areas that will needed to take decisive action to stabilise drive top-line growth in the future: creativity, to drive sustainable the Company and reposition it for growth; technology and talent. top ‑line growth. an evolution because ours is a talent business, and we need to transform at a deliberate pace – taking our people and clients with us on the journey.

In 2019, we laid the groundwork by making major structural changes to the Company. We implemented the mergers announced in the second half of 2018, creating fewer, stronger agency brands. We have completed more than 50 disposals in the past two years – the most significant being the sale of 60% of Kantar to Bain Capital.

16 WPP ANNUAL REPORT 2019 OUR STRATEGY STRATEGIC REPORT

VISION A vision developed with & OFFER our people and clients Read more from page 18 and a refreshed, more contemporary offer to meet the needs of our clients in a rapidly changing market.

CREATIVITY A renewed commitment Read more from page 24 to creativity, WPP’s most important competitive advantage.

DATA & Harnessing the strength TECHNOLOGY of our marketing and Read more from page 30 advertising technology, and unique partnerships with technology firms, for the benefit of clients.

SIMPLER Reducing complexity STRUCTURE and making sure our Read more from page 36 clients can access the best resources from across the Company.

PEOPLE & Investment in our people, CULTURE culture and values to Read more from page 44 ensure WPP is the natural home for the best and

Our approach to sustainability brightest talent. aligns with our strategy. See page 61

WPP ANNUAL REPORT 2019 17 STRATEGIC REPORT OUR STRATEGY

VISION & OFFER

We are a creative transformation company.

“  THE NEW WPP IS PURPOSEFUL, DRIVEN AND VISIBLE ON THE WORLD STAGE.”

Mark Read Chief Executive Officer

How we are delivering on our strategy

CREATIVITY POWERED BY BUILDING OUR BRAND Progress in 2019 TECHNOLOGY A strong and visible WPP brand will –– Won significant client WPP’s vision is to be a creative complement and support our strong assignments based on transformation company, using the power agency brands within the Company. For new offer of creativity to build better futures for our the first time, WPP hosted spaces at the –– Increased investment in people, clients and communities. 2019 Cannes Lions Festival of Creativity and the faster-growth areas of offer: was the year this inspiring vision and our Consumer Electronics Show (CES), creating experience, commerce modern new offer was rolled out to our new platforms for our people, agencies and technology clients and the industry. and partners to showcase original thinking –– Strong presence at events and extraordinary work. celebrating creativity, Our simpler, more progressive offer covers innovation and technology four areas: communications, experience, As a founding partner of the Institute for –– Launched WPP iQ, a new commerce and technology. Each of these is Real Growth, we are offering leading online space for the best critical to the success of modern marketing marketers unique insights, plus exclusive industry intelligence from and will expand WPP’s own business in learning and development programmes to across the Company high-growth areas. The last year has drive the future growth of their business. seen many of our largest existing clients Focus for 2020 – including Ford, Google and Coca-Cola – We also launched a new home for our –– Accelerate the delivery of our and new clients asking us for new services thought leadership online. WPP iQ new offer in these future-facing areas and responding showcases the best thinking and industry –– Deliver an always-on marketing positively to our proposition of creativity intelligence from across the Company and and growth model to respond powered by technology. its agencies. in real-time to our clients –– Create a connected CMO community

18 WPP ANNUAL REPORT 2019 OUR STRATEGY STRATEGIC REPORT

OUR OFFER TO CLIENTS

COMMUNICATIONS EXPERIENCE

COMMERCE TECHNOLOGY

We create powerful We build seamless We make it easy for our We leverage our global ideas based on deep experiences to make clients to sell within the technology partnerships insights to connect brands part of people’s complex ecosystem of and unique scaled brands’ messaging with lives – creating more where and how their platforms and capabilities audiences in meaningful memorable engagement customers want to buy to build technology and ways and channels at and driving better data solutions fit for our meaningful moments business results clients’ needs

WPP ANNUAL REPORT 2019 19 STRATEGIC REPORT OUR STRATEGY VISION & OFFER

AN OPEN, CONFIDENT AND FORWARD- LOOKING COMPANY

WPP presented its new, revitalised brand at the 2019 Cannes Lions Festival of Creativity through its first-ever physical presence at the event.

The WPP Beach provided a platform to showcase the creativity of WPP’s agencies and the extraordinary work they do for clients – as well as present an open, confident and forward-looking company to the industry.

It was the place to hear from leading thinkers and business executives, with wide-ranging talks from Unilever CEO Alan Jope, Facebook’s Sheryl Sandberg, Snap founder Evan Spiegel, Reddit CEO Steve Huffman, Microsoft’s Corporate VP of Brand, Advertising & Research, Kathleen Hall and 21st Century Fox’s Lachlan Murdoch. A packed-out Palais des Festivals also saw WPP share a stage with its client Wendy’s for a discussion on how VMLY&R transformed the brand into a social media phenomenon.

WPP demonstrated its industry leadership on important issues by launching new initiatives at the festival, including committing to phasing out single-use plastics in its offices and Campuses worldwide and an industry-wide programme to address the problem of harmful content online.

The WPP Beach had as its centrepiece what Campaign magazine called a “stunning installation” based on the WPP logo. 51% WPP’s share of voice in Cannes vs its competitors on social media By impressions on Twitter and LinkedIn, during 2019 Cannes Lions Festival of Creativity, 17-21 June

20 WPP ANNUAL REPORT 2019 OUR STRATEGY STRATEGIC REPORT

“ A STRONG WPP BRAND CAN DELIVER VALUE ACROSS THE WHOLE COMPANY.”

Laurent Ezekiel Chief Marketing & Growth Officer

WPP ANNUAL REPORT 2019 21 STRATEGIC REPORT OUR STRATEGY VISION & OFFER

AUTHENTIC BEAUTY

AGENCY MINDSHARE

CLIENT DOVE (UNILEVER)

70% of women do not feel represented in the images they see every day. Dove, long champions of real beauty, wanted advertising to depict real women. Women that would be recognisable. Dove took action to create the world’s first publicly accessible photo library, created by women and non-binary individuals, designed to shatter beauty stereotypes.

Mindshare formed a ground-breaking partnership with publishing house Hearst in the United States, integrating images from Project #ShowUs into authentic, relatable content for Cosmopolitan, Elle, Marie Claire, Harper’s Bazaar and more.

The mission to better represent women in media came to life as magazines replaced photoshoots with Project #ShowUs images, highlighting stories of the women in the collection and showing the importance of self-expression.

There have been over 40,000 social media mentions of the campaign which has reached more than 20 million women across the United States. A survey showed nine in ten agreed that Dove inspires women to feel more confident about the way they look – and just as many agreed Dove shows that diversity and representation is possible in media.

Project #ShowUs continues to empower women, changing how – and where – women see themselves in the world. 20m+ 40,000+ women reached social media posts across the in response to the United States campaign

22 WPP ANNUAL REPORT 2019 OUR STRATEGY STRATEGIC REPORT

WPP ANNUAL REPORT 2019 23 STRATEGIC REPORT OUR STRATEGY

CREATIVITY

Our most important competitive advantage is being able to respond to our clients’ needs with creativity and imagination.

How we are delivering on our strategy

REINVENTING CREATIVITY Progress in 2019 The creativity of our people – the power –– Recruitment of high-profile of their ideas to deliver results for clients – creative leaders, including six is what makes WPP special and what key hires in the United States differentiates us from other professional –– Strong performance at services firms. WPP has great creative Cannes, including five Grand strengths, but we must continue to invest Prix, one Titanium Lion, 17 in talent and reinvent creativity on an Gold, 59 Silver and 107 Bronze ever-broader canvas. We also need to –– Continued demonstration of apply technology more effectively to creative firepower with four enhance our creative capabilities at scale. spots at Super Bowl 2020

Last year we announced a renewed Focus for 2020 commitment to and investment in creativity –– Use the power of creativity and creative leadership. In the first year, to support clients, NGOs this has enabled us to attract new and governments during world-class talent, with significant hires the Covid-19 crisis across key markets. –– Recruit leading creative talent, particularly in the United States –– Develop learning programmes that keep our creative leaders innovating in a rapidly changing landscape –– Enable creative talent to move more seamlessly across the Company

24 WPP ANNUAL REPORT 2019 OUR STRATEGY STRATEGIC REPORT

INFINITE IN MOOD AND EXPRESSION

AGENCY SUPERUNION LONDON

CLIENT BBC TWO

BBC Two is a runway for the boldest and most risk-taking programming, with stories that surprise you at every turn. This brand, created in collaboration with BBC Creative and over a dozen renowned digital artists from around the world, puts diverse, contrasting emotions at the heart of the viewer’s experience through dynamic animations. Infinite in mood and expression, and every bit as unpredictable as the cutting-edge content either side of it.

Winner Cannes Lions, tag">D&AD, New York Festivals and Art Directors Club New York

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CREATIVE ACTIVISM

AGENCY SCHOLZ & FRIENDS

CLIENT THE FEMALE COMPANY

In Germany, tampons and other female sanitary products attract the top value added tax rate of 19% while many luxury goods – like truffles and oil paintings – are taxed with the reduced rate of 7%. The so-called tampon tax has already been abolished in some countries.

The Female Company, an online shop that sells organic female sanitary products, decided to take on the discriminatory tax. To gain attention for the tampon tax with media, influencers and politicians, Scholz & Friends outsmarted the tax law with the law itself.

The agency packaged tampons in books which are also taxed with the reduced rate of 7%. But The Tampon Book is much more than smart packaging that hacked the German tax system. The Tampon Book contains 45 pages with bold illustrations and empowering stories about menstruation, taboos and feminism and successfully promoted a petition that urged the German Parliament to discuss the abolition of the tampon tax.

It was subsequently announced that the reduced VAT rate will be charged for female sanitary products, and this became law in January 2020.

Winner 10,000 Cannes Grand Prix copies of the book sold and four Lions April -October 2019

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DNA DISCOUNTS

AGENCY OGILVY

CLIENT AEROMEXICO

Aeromexico wants everyone to know there are no borders within us. And while the United States is the top destination for people flying from Mexico, Mexico is far from the top destination for people flying from the United States.

Ogilvy worked with the commercial airline to change that and set out to prove, for many people, Mexico is not just a place on the other side of the border. The agency visited Wharton in Texas and interviewed people who said they would never go to Mexico. It was not their “cup of tea”, with one person, Bill, saying he likes tequila and burritos – but does not like Mexico.

People with Mexican heritage in the United States are on the rise – even if many do not realise it. Ogilvy gave DNA tests to their interviewees and offered discounted flights based on their percentage of Mexican descent: the more Mexican they were, the greater the discount. The results shifted perspectives. Bill discovers he is 18% Mexican, entitling him to 18% off flights; he boasts that this is 3.6% better than his wife’s result.

With limited budget, the agency focused on social media and delivered 1.6 billion impressions including media coverage in The New York Times and TIME, as well as on broadcast networks including Fox News and CNN. The campaign was a viral hit. 1.6bn 33.7% earned media increase in ticket sales impressions from the United States January 2019 to Mexico In January 2019 vs average monthly revenue in 2018

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DATA & TECHNOLOGY

We are using technology to harness our collective intelligence, ingenuity and scale for the benefit of our clients.

How we are delivering on our strategy

DRIVING INNOVATION Progress in 2019 “TECHNOLOGY Our technology strategy came to life –– Established the WPP HELPS US SOLVE in 2019. We established the central technology team WPP technology team to manage our and cross-agency THE COMPLEXITY technology partnerships, product and Technology Council OF MODERN data portfolio, and technology skills –– Developed 360° partner MARKETING.” acceleration; we created a WPP programmes with all our key Technology Council to increase technology partners (Adobe, Stephan Pretorius collaboration and knowledge transfer Amazon, Facebook, Google, Chief Technology Officer between our agency technology leaders; IBM, Microsoft and Salesforce) and we delivered technology innovation –– Rationalised our internal in areas as diverse as creative AI, product development strategy campaign optimisation and market simulation for clients around the world. Focus for 2020 –– Launch and drive adoption of WPP OPEN, a business platform to share the best technology and data innovations from across the Company –– Accelerate our AI and creative technology skills development –– Increase our joint go-to- market activity with partners

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OUR UNIQUE APPROACH

SCALED GLOBAL WPP OPEN PARTNERSHIPS The development of Leveraging our WPP OPEN, a business partnerships with platform to make the world’s leading the best data and technology technology solutions companies to create from across WPP differentiated and our partners offerings and grow available to all our capability

DISTRIBUTED DEEP INNOVATION SPECIALISATION Stimulating innovation Continuing to enhance to occur in a structured our specialised way in all our agencies technical capabilities in advertising and marketing technology

WPP ANNUAL REPORT 2019 31 STRATEGIC REPORT OUR STRATEGY DATA & TECHNOLOGY

lemon ginger

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HUMAN CREATIVITY MEETS ARTIFICIAL

Key words relating to INTELLIGENCE

AGENCY Recipes ESSENCE CLIENT GOOGLE

How do you create personalised online ads that do not use personal data?

Through combining smart copywriting with AI language and image recognition, Essence and Google are pioneering a future where ads can be relevant, meaningful and helpful for consumers – free of any privacy concerns.

Essence invented a new way to target specific web pages with specific ads at scale using Google Marketing Platform. Codenamed “Project Pegasus”, this approach uses machine learning to analyse page content and context, using publisher Hey Google, add ginger data instead of user data. An automated process powers the production of thousands to my shopping list. of creative options, each customised to be relevant to every article on a publisher’s website in a brand-safe way.

The agency’s first Pegasus-powered campaign was for Google Home. It served thousands of dynamic ads that demonstrated how Google’s smart speakers can be used in environments directly related to the content Learn more on the page.

In 2019, campaigns using Pegasus to promote Google products demonstrated the effectiveness of this approach, driving a 5.2% increase in purchase consideration and a 5.1% increase in category understanding where generic ads drove no uplift. Lemon and ginger friands for dessert tonight 5.2% 5.1% increase in purchase increase in category consideration understanding

Learn more

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A GAME CHANGER

AGENCY VMLY&R

CLIENT WENDY’S

Fortnite is a global-gaming phenomenon with an estimated 250 million players and one of the largest audiences on streaming site Twitch. The potential for brands is significant, but most are left tweeting about it from the sidelines or paying significant sums for in-game sponsorships – that is until VMLY&R developed a game-changing campaign for Wendy’s.

When Fortnite introduced a new game mode called Food Fight, pitting Team Burger against Team Pizza, VMLY&R picked up a controller and found an organic way into the game. The agency created a digital avatar that looked suspiciously like Wendy’s namesake.

Subverting the game’s objective of killing other players, this red-hooded character set out to destroy Team Burger’s freezers – again and again – and through this action took Wendy’s message of “fresh, never frozen beef” into the game and spread it far and wide.

By recording and streaming footage of a Wendy’s-based character destroying freezers, the fast-food chain successfully penetrated not just the gaming community, but also live-streaming platforms, social media and mainstream media outlets. The success of the campaign led to it being awarded the Social & Influencer Grand Prix at the Cannes Lions Festival of Creativity. 1.5m minutes watched 119% increase in mentions of Wendy’s across all platforms (Facebook, Instagram, Twitter, YouTube) Winner Cannes Grand Prix and eight Lions

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SIMPLER STRUCTURE CLIENTS

The new WPP is built around the needs of clients.

How we are delivering on our strategy

ACCESS TO THE BEST OF WPP Progress in 2019 “CLIENT-CENTRICITY Client-centricity runs through every aspect –– Appointed 17 Global Client KEEPS US FOCUSED of our strategy. It means simplifying our Leaders to head up our most structure, building solutions tailored to important client relationships AND FRESH.” clients, and making available our best talent –– Won 18 new major global Lindsay Pattison and cutting-edge capabilities – all in service accounts Chief Client Officer of client growth and satisfaction. –– Expanded almost half of our existing top-50 client Many of our clients have Global Client relationships Leaders assigned to ensure easy and expert access to the breadth and depth of WPP. Focus for 2020 They play a critical role in setting our clients –– Support clients and help up for success in the modern marketing them chart a course through world, delivering our expanded offer of the Covid-19 pandemic communications, experience, commerce –– Establish a best-in-class and technology (see page 19). customer feedback satisfaction system –– Continue to strengthen central resources for high-impact engagements, including more resource in the United States

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COMPANIES

Our streamlined company structure delivers what our clients need.

How we are delivering on our strategy

A SIMPLIFIED PORTFOLIO Progress in 2019 “WPP TODAY IS The mergers to create VMLY&R and –– Sale of 60% share in Kantar SIMPLER, EASIER TO Wunderman Thompson combined brilliant –– 22 disposals of non-core MANAGE AND EASIER creativity, expertise in data and sophisticated businesses technology skills. These are the capabilities –– 100 local office mergers and FOR OUR CLIENTS TO that our clients demand – and we can deliver 80 business unit closures NAVIGATE.” them through single, joined-up companies that work on a global scale. Focus for 2020 Andrew Scott –– Deliver cost-reduction and Chief Operating Officer The sale of 60% of Kantar to Bain Capital cash-conservation measures in 2019 further simplified our business. to address the impact of Our partnership with Bain Capital means Covid-19 we will participate in the growth of Kantar –– Develop single approaches and allows our clients to continue to benefit to technology, finance and from its services. This transaction largely people functions across completed our disposal programme set the Company out in last year’s Annual Report.

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A SEAMLESS EXPERIENCE

AGENCIES GTB, VMLY&R, BURROWS, OGILVY AND COGNIFIDE

CLIENT FORD

The Mustang Mach-E was the first significant ecommerce release for Ford and this global launch came with a deadline that depended on collaboration across our agencies.

Ford needed a seamless experience – to turn the anticipation of Mach-E into reality – for a vehicle that would not physically exist at the time of launch.

What started as an exploration to simply extend the existing online experience soon became a holistic global approach. Through a series of design sprints, involving the client, we demonstrated that ecommerce had to be considered as part of the full customer experience. The output was a strategy with three recommendations: ecommerce integrated into the entire online journey; tools to support and guide customers to the right vehicle; and the ability to purchase whenever is right for them, on their personal ecommerce journey.

With a hard launch deadline approaching, co-location with Ford IT was critical to delivery.

GTB, VMLY&R, Ogilvy and Cognifide in Europe and North America created a Global Design Delivery Process, with Burrows leading visualisation. This meant designs were delivered to Ford’s developers by a combined international agency team.

We were collectively responsible for bringing the Mach-E to launch – selling the aesthetic and innovation before the vehicle itself had even been built.

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COUNTRIES

Our country strategy is designed to leverage our collective strengths in important markets.

How we are delivering on our strategy

WORLD-CLASS WORKING Progress in 2019 “WPP CAMPUSES ENVIRONMENTS –– Established our WPP INSPIRE OUR Our Campus programme is central to Campus strategic vision our country-level integration strategy. –– Opened new Campuses in PEOPLE TO COME WPP Campuses provide our people with Helsinki, Bucharest, Madrid, TOGETHER TO DO outstanding environments that allow them Amsterdam and Mumbai THEIR BEST, MOST to do their best work; they foster an open, CREATIVE WORK.” inclusive and collaborative culture; they Focus for 2020 help to simplify our structure; they cement –– Ensure safe workspaces when Ranjana Singh our leadership position in key country people return to offices after Indonesia and Vietnam markets; and they provide our clients with Covid-19 lockdowns Country Manager a tangible expression of WPP’s integrated, –– Activate a collaborative WPP agile, tech-enabled offer. Campus culture that facilitates extraordinary work In 2019, we opened five new Campuses: –– Open new Campuses in in Helsinki, Bucharest, Amsterdam, Madrid Gurugram, Hong Kong and Mumbai, bringing our total to 16 WPP and Chicago Campuses across four continents. Before the end of 2020, we will open a further three Campuses and we aim to have 75,000 people in 60 Campus locations worldwide by 2023.

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CLIENTS, COUNTRIES AND COMPANIES

Proportion of total WPP revenue less pass-through costs

TOP 10 TOP 20 COMPANIES COUNTRIES 88% 86%

TOP 30 CLIENTS 27%

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INTEGRATED, COLLABORATIVE AND CREATIVE

CAMPUS AMSTERDAM

At the beginning of 2019, WPP had 1,500 people in Amsterdam operating across 11 different locations in the city. Today, our people and their agencies are housed in a single modern workplace – Amsteldok.

Refurbished by WPP’s architectural and design consultancy BDG, the previously derelict building has been transformed into a vibrant 19,000m2 working environment that will act as both an innovative office and community space.

The office building was Europe’s largest when it was completed in 1973 by renowned architect Huig Aart Maaskant. Located on the river Amstel, the striking, box-stacked structure is a new centre of creativity in the heart of Amsterdam, complete with renovated roof terraces, a business lounge and an event space.

Each WPP Campus is designed to provide world-class spaces that bring together our people and agencies in one location, encouraging greater collaboration and giving clients easier access to all of WPP’s talent and expertise. Winner FX International Design Awards 2019 BREEAM Very Good certification standard

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“ A FABULOUS GIFT FOR THE CITY.”

Femke Halsema Mayor of Amsterdam

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PEOPLE & CULTURE

Openness, optimism and a commitment to extraordinary work.

How we are delivering on our strategy

ATTRACTING AND RETAINING Progress in 2019 “WE ARE TAKING THE BEST TALENT –– Programme to promote new ACTION TO REALISE We believe greater inclusion, diversity values across the Company and gender balance leads to more rewarding –– Reinvigorated creative THE FULL POTENTIAL and successful workplaces. Our core values recruiting and hiring OF OUR PEOPLE of open, optimistic and extraordinary are experience BY CREATING OPEN being woven into the fabric of our –– Enhanced our employee AND INCLUSIVE organisation, enabling WPP to continue experience with more defined to attract and retain the best talent. and supported career paths WORKPLACES THAT –– Developed more inclusive CAN DRIVE BUSINESS We are actively engaging with our policies and benefits for SUCCESS.” people to break down barriers and nurture employees environments where everyone can connect, Jacqui Canney collaborate, learn and grow. In 2019, we Focus for 2020 Chief People Officer implemented changes to make it easier –– Prioritise employee wellbeing for talent to progress across WPP and its and safety during and beyond agencies – so we are one true company the coronavirus pandemic not a collection of separate businesses. –– Increase productivity and delivery of services to clients –– Drive inclusivity and diversity through early career programmes –– Develop a talent pipeline of next generation leaders –– Enhance data-driven talent decisions based on transparent and consistent delivery of services

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OUR VALUES

OPEN

We are inclusive and collaborative We encourage the free exchange of ideas We respect and celebrate diverse views We are open-minded: to new ideas, new partnerships, new ways of working

OPTIMISTIC

We believe in the power of creativity, technology and talent to create better futures for our people, clients and communities We approach all that we do with confidence: to try the new and to seek the unexpected

EXTRAORDINARY

We are stronger together: through collaboration we achieve the amazing We are creative leaders and pioneers of our industry We deliver extraordinary every day

WPP ANNUAL REPORT 2019 45 STRATEGIC REPORT OUR STRATEGY PEOPLE & CULTURE

UNPACK THE PROBLEM

WPP has committed to phasing out single-use plastics in its 3,000-plus agency offices and Campuses worldwide. While there is much we can do as a business, our people recognise the wider role we can play in helping our clients to transition to a world where plastic is reused and recycled. As a creative company, we also understand the power our work has to influence consumers to change their behaviour.

The Company held its first “Unpack the Problem” hackathon, an event that brought together people from across WPP’s agencies to dedicate two days to exploring the role of creativity and technology in tackling plastic pollution. In partnership with A Plastic Planet and with data from Pinterest, our people used their collective brainpower to develop new solutions to pitch to a panel of judges.

The creative solutions were ambitious, scalable and had a measurable impact. Ideas included tools designed to help ecommerce sites make it easier for their consumers to make sustainable purchase decisions, and an agency with a mission to support clients with their plastic pollution commitments.

The winning team, who designed a new “green” ecommerce search filter, now has an opportunity to transform their idea into an actionable solution to help reduce the impact of plastic on our planet. 35 people from 17 agencies producing five creative solutions

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WPP ANNUAL REPORT 2019 47 STRATEGIC REPORT

et’s begin by eliminating. When we talk about creativity L in marketing communications, we’re not talking about paintings, plays or poetry. Creativity in marketing uses exactly the same tools as the fine arts do – words, images, sound – but unlike the fine arts, all creativity in marketing exists for an agreed purpose. It is expected to have an effect on its audience: on their knowledge, on their feelings, on their behaviour. “ I’M NOT ENTIRELY It is expected not only to pay for itself but to return more than its SURE WHAT IT IS cost to its sponsor. BUT I DO KNOW That’s the only class of creativity that concerns us here. But how do we recognise I WANT IT.” it? For years we’ve ducked the question by sub-contracting the identification of creativity to the judges of creative awards A FOOLHARDY ATTEMPT ceremonies: if it gets an award for creativity, it’s obviously creative. But that’s not really TO DE-MYSTIFY THAT good enough. Creativity in our world existed PRECIOUS PROPERTY long before creative awards came into being. We ought to know exactly what it is WE CALL CREATIVITY that we value so highly, why we’re right to do so and how to encourage more of it.

BY JEREMY BULLMORE Many years ago, according to advertising folklore, an agency copywriter, walking on Madison Avenue, encountered a beggar. The man held a sign which read, “I am blind.” The upturned cap at his feet was almost empty.

The copywriter gently reached for the card, took out his pen, added three words, returned the card to the beggar and resumed his walk. Two hours later, he returned.

The beggar hadn’t moved but his upturned cap was no longer almost empty. It contained a handsome pile of nickels and dimes and even a few dollar bills. The card, as amended by the copywriter, now read, “It’s Spring – and I am blind.”

48 WPP ANNUAL REPORT 2019 JEREMY BULLMORE’S ESSAY STRATEGIC REPORT

WILLING COLLABORATION in-store display, influencers or news items. be implicit. Again, the audience is being The process of thought that the copywriter Whether your parents used that brand – or invited to participate; to absorb subconsciously went through would have been familiar to didn’t – can have an effect on how you feel the significance of the idea, or the story, or any good advertising agency. What’s the about that brand. the music, or the choice of celebrity. Even objective? To increase the beggar’s takings the choice of media can, of itself, contribute from passers-by. What’s the strategy? To The art of creating a strong and distinctive to a brand’s personality. remind passers-by of the deprivations that brand is first to determine what precise set the blind suffer. So far, so simple. The of characteristics you believe, realistically, This is how brands are built, become salient, copywriter could have written: “I am blind – will make that brand most attractive to acquire a kind of fame, make their presence so I can’t see what you can see.” That would which defined set of people; and then to felt. And, as a result, earn loyalty, command have met the brief all right – but it wouldn’t create the associations – the clues, the a fair price, resist competition and reliably have pulled in the dollars. stimuli – that will trigger those target deliver profit in the years ahead. But as any responses in the minds of those people. publicist will tell you, for fame to be sustained, Instead, he did what talented communicators, the subject must be kept in the public eye through intuition and training, instinctively This process demands a high degree of both or that fame will fade. For the majority of do. Based on his understanding of human discipline and creativity. Brand positioning brands, already enjoying an earned position, nature, he sought for an idea that would act must make competitive sense; so you need the role for creativity is primarily one of as a spur, as a stimulus, that would conjure an to know not just how people currently feel brand maintenance. A company would never immediate, rich and intense response in the about your own brand but how they feel question the need for a maintenance budget minds of those passers-by. about all other brands in the same sector. to protect its tangible assets. The case for a The interpretation of the necessary research, maintenance budget for its brands is equally Unlike the clumsy alternative, “It’s Spring” is if it is to illuminate a path to the future rather compelling – and one that only creativity incomplete: its full significance is imagined than simply deliver a snapshot of the present, can deliver. and supplied by the onlooker. And all the demands imagination (one outstanding evidence suggests that, in any form of agency planner has said that she not only reads communication, the more you can entice research findings, she tries to smell them). your subjects into willing collaboration, the more successful that communication will be. When the ideal brand responses have been Jeremy Bullmore is a former Chairman of identified and conditionally agreed, already J. Walter Thompson London. He has also Through its sheer efficiency, this kind of an imaginative act, it’s time for invention been a Non-Executive Director of WPP and creativity makes marketing money go (it’s seldom quite so linear; often the right a member of its Advisory Board. He has been described by Campaign magazine further. It may not always look “creative” and strategy emerges gradually as the process as “quite possibly the most admired man may seldom win creative awards, but it’s of invention goes through phases of trial and in advertising” and “Adland’s greatest worth a lot more than a piece of silverware. error). The search is not so much for explicit philosopher.” Marketing magazine simply And it’s particularly valuable when seeking an propositions or messages; the most effective observed: “When Mr Bullmore speaks, immediate response – or “brand activation” factors that affect brand reputation tend to the world listens.” to use the jargon. “It’s Spring” activated a lot of people to take immediate action.

BRAND-BUILDING Brand-building calls for a different form of creativity; though the term needs a bit of sceptical interrogation (see later).

It’s well-established that successful brands offer their users more than pure function. Successful brands have personalities, images, reputations: people can be fond of brands; can unselfconsciously describe them as “friendly” or “bossy” or “generous”. These characteristics are created in people’s minds as a result of a multitude of brand associations that are absorbed at a very low level of consciousness. Satisfaction with function is clearly paramount. Other associations may be advertisements, packaging, sponsorship,

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REMEMBERING TWO INDUSTRY GREATS

Lester Wunderman, Chairman Emeritus and founder of Wunderman, the original and largest direct marketing agency, died on 9 January 2019 in New York. He was 98.

trailblazer in the advertising industry, In an address at Massachusetts Institute of While he left the helm of Wunderman in Mr Wunderman launched a new kind Technology in 1967 he identified, defined 1998, he reported to work every day at the A of advertising agency in 1958 – one and set the foundation for today’s direct agency’s offices, where he often met with that focused on delivering sales for its marketing industry, earning the title of clients, executives and interns alike. He was clients. That agency concept caught on and “The Father of Direct Marketing”. revered and respected throughout WPP. led to the creation of today’s trillion-dollar direct marketing industry. The visionary In the same year, he served at the behest Mr Wunderman is fondly remembered by marketing techniques he conceived and of President Lyndon Johnson to champion Sue, whom he married in 1975, his son Marc perfected over his long and brilliant career usage and acceptance of the fledgling U.S. and daughter Karen, and three stepchildren, transformed the advertising industry and Postal Service’s Zip Code. Patrick, James and Thomas. continue to shape the interactive marketplace. Mr Wunderman received many awards A New Yorker throughout his life, from the industry, including Hall of Fame Mr Wunderman was born in 1920 in the designations from the Direct Marketing Bronx. After an apprenticeship served Association and the American Advertising at several agencies, he joined Maxwell Federation. He received the Golden Apple Sackheim & Company in 1947, where he from the Direct Marketing Club of New became executive vice president. In 1958, York and Marketing EDGE’s Lifetime he founded Wunderman, Ricotta & Kline, Achievement Award, while TIME heralded subsequently known as Wunderman. Mr Wunderman as one of the “Great Pitchmen over the Years”.

50 WPP ANNUAL REPORT 2019 REMEMBERING TWO INDUSTRY GREATS STRATEGIC REPORT

Harold Burson, the 20th century’s most influential PR figure and founder of Burson-Marsteller, died on 10 January 2020 at the age of 98.

leading figure in the transformation of Following his discharge from the army in After he stepped down as Chief Executive public relations into a global business, 1946, he opened his first public relations Officer of Burson-Marsteller in 1988, Mr A Mr Burson was a counsellor to and firm in New York in “a tiny nook in a Burson continued to be an engaged and confidant of chief executive officers and client’s office”. inspirational presence within the firm that government leaders across the world. In carries his name, and across WPP as a whole. 1999, a survey by PRWeek named Mr Burson In 1952 Mr Burson met William A. Marsteller, as “the century’s most influential PR figure”. with whom his name was linked by a hyphen Mr Burson was married to Bette for one for 65 years. The affiliation with Mr Marsteller month short of 63 years and is survived by Born in 1921 in Memphis, Tennessee, he developed into a new company, Burson- his two sons, Scott and Mark, as well as enrolled at the University of Mississippi aged Marsteller, which opened in 1953 and offered five grandchildren. 15, covering his tuition as a stringer for the “integrated communications services” to Memphis Commercial Appeal. He enlisted in business-to-business clients. By 1983, the United States Army in 1943, and in 1945 Burson-Marsteller was the world’s largest was assigned to the news staff of the public relations firm. American Forces Network to report on the Nuremburg Trial. He was the only reporter He received numerous industry accolades, to obtain an interview during the trial with and sits in the Hall of Fame of the Public Associate Justice Robert H. Jackson, the Relations Society of America, the Arthur W. chief American prosecutor. Mr Burson is Page Society, PRWeek, PR News and the believed to have been the last living reporter Institute of Public Relations. He also shares a who covered the historic event. place in the Humes High School Hall of Fame in Memphis with Elvis Presley.

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FINANCIAL REVIEW

REVIEW OF RESULTS down 0.7%, a significant improvement Headline operating margin1 was down The financial results for 2019 are based on over the first half which was down 2.5%, 0.8 margin points to 14.4%, down 0.6 margin the Group’s continuing operations and the with North America, Western Continental points in constant currency and down results of Kantar are presented separately as Europe and Asia Pacific, Latin America, 1.2 margin points like-for-like. The difference discontinued operations. The 2017 and 2018 Africa & the Middle East and Central & between the constant currency and reported numbers have been re-presented in Eastern Europe stronger. like-for-like margin reflects the impact of accordance with IFRS 5 Non-current Assets IFRS 16 Leases. The Group’s operating margin Held for Sale and Discontinued Operations. OPERATING PROFITABILITY of 14.4% is after charging £43 million of Reported profit before tax fell by 21.9% severance costs, compared with £30 million Reported billings were £53.059 billion, down to £982 million from £1.258 billion, the in 2018 and £294 million of incentive 0.3%, down 1.4% in constant currency and difference between the headline and payments, which were 15.8% of operating down 1.0% like-for-like. reported figures reflecting principally profit before incentives, a similar level to the £153 million of restructuring and the £311 million or 15.9% in 2018. Reported revenue was up 1.4% at £13.234 transformation costs and £48 million of billion. Revenue on a constant currency goodwill impairment charges. In constant The Group’s headline operating margin, basis was up 0.2% compared with last year, currencies, reported profit before tax fell excluding all incentives2 and income from the difference to the reportable number by 22.3%. associates, was 17.1%, down 0.9 margin reflecting the weakness of the pound sterling points, compared with 18.0% last year. against most currencies, particularly in the Reported profit after tax fell by 29.4% to The Group’s staff costs to revenue less first half of the year. On a like-for-like basis, £707 million from £1.002 billion. In constant pass-through costs ratio, including severance which excludes the impact of currency and currencies, profits after tax fell 30.3%. and incentives, increased by 1.5 margin acquisitions, revenue was flat. points to 65.4% compared to 63.9% in 2018. Headline EBITDA was down 5.3% to £1.830 Reported revenue less pass-through costs billion, from £1.933 billion the previous year On a like-for-like basis, the average number was down 0.3%, down 1.5% in constant and down 5.6% in constant currency. The of people in the Group, excluding associates, currency and down 1.6% like-for-like, within Group’s revenue is more weighted to the in 2019 was 106,508 compared to 106,555 in the guidance range of -1.5% to -2.0% second half of the year across all regions 2018. On the same basis, the total number of re-confirmed in October 2019. In the second and sectors, and, particularly, in the faster people, excluding associates, at 31 December half, like-for-like revenue was up 0.9%, a growing markets of Asia Pacific and Latin 2019 was 106,786 compared to 105,900 at significant improvement from the first half of America. As a result, profitability and margin 31 December 2018, an increase of 0.8%. down 0.9%, with North America, the United continue to be skewed to the second half Kingdom and Western Continental Europe of the year, with the Group earning Notes 1 He adline operating profit (excluding income from associates) improving, partly offset by Asia Pacific, approximately 40% of its profits in the first as a percentage of revenue less pass-through costs. Latin America, Africa & the Middle East half and 60% in the second half. Headline 2 S hort- and long-term incentives and the cost of and Central & Eastern Europe which were operating profit for 2019 was down 5.5% to share-based incentives. slower. On the same basis, revenue less £1.561 billion, from £1.651 billion and down pass-through costs in the second half was 5.6% in constant currencies.

KEY PERFORMANCE INDICATORS (2019) -1.6% 14.4% 89.3% Like -for-like revenue less Headline operating margin Free cash flow conversion1 pass -through costs growth (2018: 15.2%) (2018: 80.2%) (2018: -0.2%)

This Strategic report should be read in conjunction with pages 94-137 and pages 198-203. The Group’s key performance indicators are discussed in further detail in this report.

This Strategic report includes figures and ratios that are not readily available from the financial statements. Management believes that these non-GAAP measures, including constant currency and like-for-like growth, and headline profit measures, are both useful and necessary to better understand the Group’s results. Where required, details of how these have been arrived at are shown in note 32 to the financial statements and are defined in the glossary on pages 204 and 205.

Note 1 Fr ee cash flow conversion is the ratio of free cash flow to headline earnings. Free cash flow is after earnouts and changes in working capital and before new acquisition spend, disposals and shareholder distributions. Free cash flow conversion represents total continuing and discontinued operations.

52 WPP ANNUAL REPORT 2019 FINANCIAL REVIEW STRATEGIC REPORT

EXCEPTIONAL GAINS AND This gives a net exceptional loss of £143 EARNINGS RESTRUCTURING AND million and compares with a net exceptional Headline profit before tax was down 11.7% TRANSFORMATION COSTS loss in 2018 of £70 million. to £1.363 billion from £1.543 billion, and down As outlined at the investor day on 11.6% in constant currencies. 11 December 2018, we have undertaken a DISCONTINUED OPERATIONS strategic review of our operations. As part As Kantar classifies as held for sale under Profits attributable to shareholders fell of that review, restructuring actions have IFRS 5, the profit for the year is presented 33.0% to £628 million from £937 million, been taken to right-size underperforming as discontinued operations on the income again reflecting principally the £153 million businesses, address high‑cost severance statement. The decrease in profit for the year of restructuring and transformation costs markets and simplify operational structures. from £138 million in 2018 to £11 million in 2019 and £48 million of goodwill impairment. This has included the merger, closure or sale primarily reflects the goodwill impairment on In constant currencies, profits attributable of a number of WPP’s operating companies. classification as held for sale of £95 million to shareholders fell by 33.8%. It also includes transformation costs with and the tax expense on the disposal of respect to strategic initiatives like co-locations £157 million, partially offset by the gain on Headline diluted earnings per share, for in major cities, IT transformation and sale of £74 million. continuing and discontinued operations, fell shared services. by 14.2% to 92.7p from 108.0p. In constant INTEREST AND TAXES currencies, earnings per share on the same In 2019, the Group recorded £121 million Net finance costs (excluding the revaluation basis fell by 14.9%. Reported diluted earnings of restructuring and transformation costs of financial instruments and interest expense per share, on the same basis, fell by 41.3% to in relation to this plan, in addition to the on lease liabilities) were £160 million, 49.5p from 84.3p and decreased 42.3% in £212 million in 2018. Of this £333 million total, compared with £180 million in 2018, constant currencies. £220 million relates to actions with a cash a decrease of £20 million. cost, with £158 million paid to date – the REGIONAL REVIEW balance to be paid in 2020 and beyond. The headline tax rate was 22.0% (2018: North America constant currency revenue Total restructuring and transformation 20.7%) and on reported profit before tax was less pass-through costs was down 4.7% in costs in 2019 of £153 million comprise the 28.0% (2018: 20.4%). The difference in the the year and down 5.7% like-for-like, with a £121 million above and £32 million of other reported tax rate in 2019 was principally due significant improvement in the second half. costs, primarily relating to the continuing to the revaluation of financial instruments Revenue less pass-through costs was down global IT transformation programme. not being tax deductible. Given the Group’s 4.0% in the second half on a like-for-like basis geographic mix of profits and the changing compared to down 7.3% on the first half as These exceptional costs of £153 million and international tax environment, the tax rate is the negative effect of some of the 2018 £48 million of associate company exceptional expected to increase slightly over the next client assignment losses started to ease. losses have been partly offset by exceptional few years. gains of £58 million, primarily relating to the gain on the sale of the Group’s investment in Chime.

REVENUE LESS PASS-THROUGH COSTS GROWTH V 2018 %

Like-for-like -1.6

Acquisitions +0.1

FX +1.2

Reported -0.3

WPP ANNUAL REPORT 2019 53 STRATEGIC REPORT FINANCIAL REVIEW

United Kingdom constant currency revenue REVENUE ANALYSIS less pass-through costs was down 0.3% in £ million 2019 ∆ reported ∆ constant1 ∆ LFL2 20183 the year and up 0.3% on a like-for-like basis, N. America 4,855 0.1% -4.1% -5.0% 4,852 with the Group’s global integrated agencies United Kingdom 1,797 0.6% 0.6% 1.8% 1,785 and particularly GroupM performing less well W. Cont. Europe 2,629 1.5% 2.9% 1.5% 2,590 in the second half of the year, partly offset AP, LA, AME, CEE4 3,953 3.5% 3.6% 4.7% 3,820 by a significant improvement in the Group’s Total Group 13,234 1.4% 0.2% 0.0% 13,047 specialist public relations businesses.

Western Continental Europe constant REVENUE LESS PASS-THROUGH COSTS ANALYSIS currency revenue less pass-through costs grew 1.0% in the year with like-for-like up £ million 2019 ∆ reported ∆ constant ∆ LFL 2018 N. America 4,034 -0.6% -4.7% -5.7% 4,060 0.7%, the second strongest performing United Kingdom 1,390 -0.3% -0.3% 0.3% 1,394 region. Germany was significantly stronger in W. Cont. Europe 2,177 -0.3% 1.0% 0.7% 2,183 the second half of the year, partly offset by a AP, LA, AME, CEE 3,246 0.2% 0.4% 1.4% 3,239 softening in France, Italy and the Netherlands. Total Group 10,847 - 0.3% - 1.5% - 1.6% 10,876

In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, HEADLINE OPERATING PROFIT ANALYSIS on a constant currency basis, revenue less * * pass-through costs growth in the region was £ million 2019 % margin 2018 % margin N. America 662 16.4% 711 17.5% 0.4% for the year with like-for-like growth 1.4%, United Kingdom 188 13.6% 180 12.9% the strongest performing region. Like-for-like W. Cont. Europe 262 12.0% 289 13.3% growth improved in the second half to 1.8%, AP, LA, AME, CEE 449 13.8% 471 14.6% compared to 1.1% in the first half, with Africa Total Group 1,561 14.4% 1,651 15.2% & the Middle East improving significantly, partly offset by a slight softening in Asia * Headline operating profit as a percentage of revenue less pass-through costs.

Pacific and Latin America. Notes 1 Percentage change at constant currency exchange rates. 2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals. 3 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the Group’s accounting policies. 4 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

REVENUE LESS PASS-THROUGH COSTS GROWTH BY REGION V 2018 %

North America -0.6

United Kingdom -0.3

Western Continental Europe -0.3

Asia Pacific, Latin America, Africa & the +0.2 Middle East and Central & Eastern Europe

Total -0.3

54 WPP ANNUAL REPORT 2019 FINANCIAL REVIEW STRATEGIC REPORT

BUSINESS SECTOR REVIEW REVENUE ANALYSIS Like-for-like revenue less pass-through costs £ million 2019 ∆ reported ∆ constant1 ∆ LFL2 20183 in the Group’s global integrated agencies Global Integrated Agencies 10,205 2.8% 1.5% 1.4% 9,931 was down 0.7% in the year, making it the Public Relations 957 2.7% 0.5% -0.7% 932 strongest performing sector. There was a Specialist Agencies 2,072 -5.1% -6.2% -5.9% 2,184 significant improvement in the second half Total Group 13,234 1.4% 0.2% 0.0% 13,047 of the year, with like-for-like growth of 0.3% compared to down 1.8% in the first half. Grey, Ogilvy, Wunderman Thompson and VMLY&R REVENUE LESS PASS-THROUGH COSTS ANALYSIS improved in the second half, partly offset by lower growth in GroupM. £ million 2019 ∆ reported ∆ constant ∆ LFL 2018 Global Integrated Agencies 8,108 0.5% -0.7% -0.7% 8,071 Public Relations 898 2.1% -0.1% -1.0% 880 Like-for-like revenue less pass-through costs Specialist Agencies 1,841 -4.4% -5.6% -5.6% 1,925 in the Group’s public relations businesses Total Group 10,847 - 0.3% - 1.5% - 1.6% 10,876 was down 1.0% in the year, with a significant improvement in the second half, down 0.4% on a like-for-like basis compared to down HEADLINE OPERATING PROFIT ANALYSIS 1.5% in the first half. The Group’s specialist public relations businesses Finsbury, Glover £ million 2019 % margin* 2018 % margin* Park, Hering Schuppener, Buchanan and Global Integrated Agencies 1,220 15.0% 1,228 15.2% Clarion performed particularly strongly in Public Relations 141 15.7% 139 15.8% Specialist Agencies 200 10.9% 284 14.7% the second half of the year. Total Group 1,561 14.4% 1,651 15.2% In the Group’s specialist agencies, like-for-like * Headline operating profit as a percentage of revenue less pass-through costs. revenue less pass-through costs was down Notes 5.6% in the year, as the Group’s specialist 1 Percentage change at constant currency exchange rates. brand consulting, advertising and direct, 2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals. 3 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and interactive and ecommerce businesses Discontinued Operations, as described in the Group’s accounting policies. came under pressure, particularly in North America, Western Continental Europe and Asia Pacific. The Group’s specialist agencies include the specialist global Ford agency, GTB, and performance reflects the loss of the omnichannel work in the second half of 2018.

REVENUE LESS PASS-THROUGH COSTS BY BUSINESS V 2018 %

Global Integrated Agencies +0.5

Public Relations +2.1

Specialist Agencies -4.4

Total -0.3

WPP ANNUAL REPORT 2019 55 STRATEGIC REPORT FINANCIAL REVIEW

CASH FLOW HIGHLIGHTS BALANCE SHEET HIGHLIGHTS It is clear that the impact of Covid-19 on In 2019, operating profit was £1.580 billion, Average net debt in 2019 was £4.282 billion, the business will be significant, but it is not depreciation, amortisation and goodwill compared to £5.025 billion in 2018, at 2019 possible at this stage to quantify the depth or impairment £734 million, non-cash share- exchange rates. On 31 December 2019 net duration of the impact. As a result, we have based incentive charges £71 million, working debt was £1.540 billion, against £4.017 billion withdrawn our previously issued guidance capital and provisions inflow £350 million, on 31 December 2018, a decrease of £2.477 for the 2020 financial year. net interest paid £190 million, tax paid billion (a decrease of £2.313 billion at 2019 £536 million, lease liabilities (including exchange rates). The reduced period end Revenue from continuing operations in interest) paid £355 million, capital expenditure debt figure reflects the benefit of £1.971 the first quarter of 2020 was £2.847 billion, £394 million, earnout payments £130 million billion proceeds in relation to the disposal down 4.9% compared with the same period and other net cash outflows £86 million. of 60% of the Group’s interest in Phase 1 of last year on a reported basis and down 4.6% Free cash flow was, therefore, an inflow the Kantar business. on a constant currency basis. Like-for-like of £1.044 billion. revenue was down 3.8% compared with last RETURN OF FUNDS TO SHAREHOLDERS year. Revenue less pass-through costs was This free cash inflow was enhanced by Funds returned to shareholders in 2019 £2.366 billion, down 4.3% on a reported £2.221 billion in net cash acquisition totalled £794 million, including dividends basis, down 4.0% in constant currency and payments and disposal proceeds (of which and share buybacks. In 2019, 4.6 million down 3.3% like-for-like. In March, like-for-like £1.971 billion was the Kantar disposal net of shares, or 0.4% of the issued share capital, revenue less pass-through costs was down cash disposed and costs, and £250 million were purchased at a cost of £44 million. 7.9% as the impact of Covid-19 began to be of net income from other disposal proceeds All of these shares were purchased in the felt more widely across our business. net of acquisition payments) and absorbed fourth quarter. by £44 million in share buybacks and BALANCE SHEET, LIQUIDITY £750 million in dividends. This resulted OUTLOOK AND HEADROOM in a net cash inflow of £2.471 billion. FINANCIAL GUIDANCE WPP has a strong balance sheet and good We have made good progress with our liquidity. Over the last two years, we have Free cash flow conversion1 in 2019 was 89% three-year strategy during 2019, creating raised approximately £3.2 billion from our (2018: 80%). a simpler business, making significant disposals programme, selling 50 businesses investments for future growth and and investments. Note strengthening our balance sheet. Our 1 Fr ee cash flow conversion is the ratio of free cash flow to financial performance in the second half As at 31 December 2019 we had cash of headline earnings. Free cash flow is after earnouts and changes in working capital and before new acquisition spend, of the year showed an encouraging £3.0 billion and total liquidity, including disposals and shareholder distributions. improvement over the first half. undrawn credit facilities, of £4.8 billion. Net debt was £1.5 billion, down from £4.0 billion a year earlier. Our year-end net debt/headline EBITDA ratio was 0.8x, compared to 2.1x the previous year.

NET DEBT £ million

4,483 4,131 4,017

3,211

1,540

2015 2016 2017 2018 2019

56 WPP ANNUAL REPORT 2019 FINANCIAL REVIEW STRATEGIC REPORT

Our covenants, which relate to our $2.5 COST REDUCTION MEASURES CASH CONSERVATION MEASURES billion revolving credit facility, are <3.5x net Most of our costs are variable in nature. We have also reviewed our capital debt/EBITDA and >5x EBITDA/net interest. We have commenced a review of our costs expenditure budgets for 2020 and looked Our bond portfolio at the 2019 year-end had to protect profitability, where possible, at opportunities to improve working capital. an average maturity of 8.2 years, with only from a decline in revenue. At the same time, We have identified savings in excess of a May 2020 €250 million Eurobond due in the we want to protect our people as much as £100 million in property and IT capital next two years. possible, as well as our ability to serve expenditure against an initial 2020 budget clients and grow when markets recover. The of around £400 million. On working capital, Given the significant uncertainty over the immediate actions we have taken include: we have a standing weekly management coming months, we are taking prudent freezing new hires; reviewing freelance process to review cash outflows and receipts action now to maintain our liquidity and expenditure; stopping discretionary costs, to monitor our position. We are continuing to ensure that we emerge from this global including travel and hotels and the costs of work closely with our clients to ensure timely crisis strong, secure, and ready to meet award shows; and postponing planned salary payment for the services we have provided in the continuing needs of our clients, increases for 2020. line with contractual commitments. On media, shareholders and other stakeholders. we are working with clients and vendors to In addition, members of the WPP Executive maintain the settlement flow. Should we see The Board has therefore decided to suspend Committee, as well as the Board, have any deterioration in payment from our media the £950 million share buyback, funded by committed to taking a 20% reduction in clients we will take appropriate action to proceeds from the Kantar transaction. their salaries or fees for an initial period of manage our cash position. Since December 2019, we have completed three months. £330 million of the programme. We anticipate these measures will generate In addition, the Board has suspended the total in-year savings for 2020 of £700-800 2019 final dividend of 37.3 pence per share, million. In addition, we are making a detailed which was due to be proposed at the 2020 assessment of further actions to reduce cost AGM. These two actions together will subject to the impact of the virus on our preserve approximately £1.1 billion of cash. business over the coming weeks and months. The Board will continue to review the status of the 2019 dividend.

For more information on our strategy see pages 16-47

WPP ANNUAL REPORT 2019 57 STRATEGIC REPORT

SUSTAINABILITY

At WPP we use the power of creativity to build better futures for our people, clients and communities.

WHY SUSTAINABILITY MATTERS There is increasing evidence that “OUR INDUSTRY HAS As the last decade drew to a close, the sustainable business drives profit A RESPONSIBILITY TO World Meteorological Organization and long-term value – sustainable confirmed it was the warmest on investment assets were valued at USE OUR POWERS FOR record. Australia experienced its hottest, $30 trillion in 2018, up a third from GOOD – TO INFLUENCE driest year, leading to devastating bush 20161, while companies with long-term NORMS AND CHANGE fires, while the Indonesian capital strategies are outperforming their BEHAVIOUR. WE CAN’T Jakarta saw deadly floods caused by the peers financially2. heaviest rainfall since records began. WAIT FOR OTHERS Meanwhile, the United Nations’ Decade TO ACT: IT’S UP TO US Climate activism continues to grow as of Action to 2030 will see accelerated TO LEAD THE WAY.” people demand change. More and more efforts to end poverty, inequality and companies across sectors see both the environmental harm, and deliver the Andrea Harris opportunities and the imperative to act. Sustainable Development Goals. More Group Chief Counsel Consumers and investors increasingly than ever, sustainable business models and Head of Sustainability expect businesses to act with are needed that will enable society to purpose and offer inclusive and survive and thrive in the new decade sustainable products. and beyond.

Our clients must navigate complex social, environmental and economic pressures against a backdrop of skills shortages, demographic shifts, political uncertainty, and a consumer base increasingly impatient for change.

1 Global Sustainable Investment Alliance 2018 Global Sustainable Investment Review. 2 Harvard Business Review.

58 WPP ANNUAL REPORT 2019 SUSTAINABILITY STRATEGIC REPORT

SHUT DOWN TO OPEN UP AGENCIES VMLY&R AND WAVEMAKER

CLIENT GAZETA.PL

When liberal news portal Gazeta.pl wanted to start a national debate in Poland about everyday sexism and gender inequalities, they turned to VMLY&R and Wavemaker for help. The agencies suggested they team up with MasterCard and BNP Paribas to buy Twój Weekend (Your Weekend), one of Poland’s longest-running and most‑read adult magazines. And then close it down. Before they shut it down, the team reimagined its last issue, The Women’s Issue, filling regular sections and columns with content on gender portrayal, sexism, equal rights and more. The project was supported by an advertising campaign, including outdoor, media, cinema, radio, press, social media and online. 4.5m 25m organic reach media impressions Winner Cannes Titanium Lion, Grand Prix, and three bronze Lions

WPP ANNUAL REPORT 2019 59 STRATEGIC REPORT SUSTAINABILITY

We continue to support our clients as evidence mounts of the need for sustainable innovation and growth.

OUR RESPONSE UNITED NATIONS SUSTAINABLE Our clients look to us for the insight, DEVELOPMENT GOALS (SDGs) expertise and creativity to balance these We support the UN SDGs as a framework interconnected pressures and communicate for government agencies, civil society, the their purpose effectively and authentically. private sector and citizens to work together Our own sustainability strategy helps us to to create a more sustainable future. meet changing client expectations with strong and credible propositions, while We have analysed the 17 Global Goals and reducing risks and creating a resilient the 169 targets which sit behind them to business for the long term. identify those which are most relevant for our business. To learn more about the Goals SUSTAINABILITY AND OUR STRATEGY we believe we can make the most significant Our sustainability strategy supports all five contribution towards, see page 11 of our full elements of our corporate strategy, which Sustainability Report 2019, available as a we launched in late 2018. The table opposite PDF download. sets out the most material ways in which sustainability supports our strategy.

60 WPP ANNUAL REPORT 2019 SUSTAINABILITY STRATEGIC REPORT

STRATEGIC ELEMENT SUSTAINABILITY STRATEGY

VISION A STRONGER OFFER FOR OUR CLIENTS A stronger offer & OFFER A growing number of clients are grappling with business practices helps us to broaden and deepen for our clients, sustainability challenges and looking to articulate these partnerships, and to meet the growing see page 64 the purpose of their brands. They look for partners expectations and sustainability requirements in Transparency and trust, who share their sustainability values and aspirations. client procurement processes. see pages 76 and 77 Our commitment to responsible and sustainable

CREATIVITY SOCIAL INVESTMENT Social investment, Our pro bono work can make a significant Pro bono work benefits our business too, see page 66 difference to charities and NGOs, enabling our providing rewarding creative opportunities for partners to raise awareness and funds, recruit our people that often result in award-winning members and achieve campaign objectives. campaigns that raise the profile of our companies.

INCLUSIVE AND DIVERSE TEAMS Attracting and Creativity thrives on diversity of background We want all of our people to feel valued and able retaining talent, and thought. This makes having an inclusive and to fulfil their potential, regardless of gender, see pages 68-70 diverse workplace essential to our long-term ethnicity, age or disability. business success.

DATA & PRIVACY AND DATA ETHICS Privacy and data TECHNOLOGY Data – including consumer data – can play an responsibility to look after this data carefully, ethics, see page 78 essential role in our work for clients. Data security to collect data only when needed and with and privacy are increasingly high-profile topics for consent where required, and to store and regulators, consumers and our clients. We have a transfer data securely.

SIMPLER GREENER OFFICE SPACE Environment, STRUCTURE Our work to simplify our structure and consolidate moving to Campus locations that: use green see page 72 our office space is driving a positive impact on our building standards; reduce our impact; help us energy use and carbon footprint. We are reducing to use space more efficiently; and encourage the overall number of offices we occupy and collaboration between our companies.

PEOPLE & CULTURE SHARED VALUES ACROSS OUR BUSINESS AND Attracting and SUPPLY CHAIN retaining talent, Strong employment policies, investment in skills, our locations. Selecting suppliers and partners see pages 68-70 and inclusive working practices help us recruit, who adopt standards consistent with our own can Supply chain, motivate and develop the talented people we reduce costs, improve efficiency and protect see page 74 need to serve our clients in all disciplines across our reputation.

A NOTE ON OUR SUSTAINABILITY DATA For our full review of our sustainability During 2019 we agreed the sale of 60% of Kantar activities and outcomes, download our to Bain Capital. To ensure comparability to 2019 Sustainability Report 2019. figures, which exclude Kantar, prior year figures have been restated. 2018 figures, and 2017’s where provided, have been restated in sections wpp.com/sustainability highlighted with the symbol K .

WPP ANNUAL REPORT 2019 61 STRATEGIC REPORT SUSTAINABILITY

62 WPP ANNUAL REPORT 2019 SUSTAINABILITY STRATEGIC REPORT

STRENGTH IN NUMBERS

AGENCY SANTO BUENOS AIRES

CLIENT SPRITE

Sprite wanted to show Gen Z that there should not be any topics they feel too uncomfortable to talk about. So Santo launched You Are Not Alone, a series of forums on Reddit where young people can express their feelings on issues that make them feel isolated. To get the conversation started, Santo asked influencers to share their own experiences to show people they are not alone. 80% 300% increase in positive increase in sentiment free media 20x more consumer engagement than previously

November 2019

WPP ANNUAL REPORT 2019 63 STRATEGIC REPORT SUSTAINABILITY

PUTTING SUSTAINABILITY AT THE HEART OF OUR OFFER FOR CLIENTS

The work we do for our clients reaches billions of people each year, presenting our greatest opportunity to create positive change.

Our clients must balance a complex set Recognising our clients’ growing focus on WPP executive is required. This referral of social and environmental challenges sustainable products and practices, we process is covered in our How We Behave with changing consumer expectations continue to strengthen our offer to ensure online training, which will contain a new and constant technological developments. we can provide our clients with the best sustainability module from 2020 onwards. While challenging, today’s landscape also support and the expertise they need to do offers major opportunities to create new well by doing good. Our companies also have copy-checking markets for more inclusive and sustainable and clearance processes for the legal team products and services. COMPLIANCE WITH MARKETING to review campaigns before publication. STANDARDS These processes have strict requirements WORK WITH IMPACT Marketing is powerful – it can change in highly regulated sectors such as In response, our clients increasingly aspire to attitudes and behaviour. It is critical that we pharmaceutical marketing. generate a lasting positive impact through apply high ethical standards to our work to their brands and look to us to help them ensure those changes are for the better. We In 2019, WPP established Risk Committees express and enhance that impact through work hard to maintain high standards and with the aims of ensuring accountability at brand purpose and strategy, communications strong compliance in areas such as ethics, both the enterprise and network level and and marketing. The breadth and depth of our human rights, privacy and data security. to review, monitor and advise on risk and expertise means we can offer clients the compliance throughout all of our businesses latest technology alongside the creativity We require that all the work our companies and markets. Duties include providing reports and sustainability expertise needed to produce for clients complies with all relevant and insights on current risk exposures, inspire consumers and help shift behaviour legal requirements, codes of practice and identifying new risk types and tracking to more sustainable norms. marketing standards. There are occasional and pro-actively addressing any breaches complaints made about campaigns we have of risk limits. This work is of growing importance to WPP. worked on, and some of these are upheld We are already engaging with corporate, by marketing standards authorities. Our government and NGO clients on issues companies take action where needed to 1 in 5 80% ranging from plastic waste to human rights prevent a recurrence. of our top 50 of our top 50 during the development of brand strategies clients have made client leads have or campaigns. Our agencies have policies and processes commitments to discussed to mitigate against online advertising carbon neutrality sustainability For example, in November, Mindshare’s 7,000 appearing on sites with illegal, illicit or with their clients people spent the agency’s 22nd anniversary unsuitable content. connecting with the scale and urgency of the climate crisis and how through their ETHICAL DECISIONS IN OUR WORK work they could be part of the solution We have a review and referral process for with #ChangeTheBrief, an invitation for the work that may present an ethical risk, such as advertising industry to use its skills to tackle work for government clients, work relating to the issue. #ChangeTheBrief is about creating sensitive products or marketing to children. work which answers the “Now” brief, but also the “Future” brief, to encourage the attitudes, Before our people can accept potentially For more examples of our client and pro bono work lifestyles and behaviours which are consistent sensitive work, they must elevate the to address social and environmental issues, with a transition to a carbon-free world. decision to the most senior person in the download our Sustainability Report 2019. As part of Mindshare Day, the network relevant office and then to the most senior took live briefs from Unilever to generate WPP executive in the country concerned, wpp.com/sustainability #ChangeTheBrief ideas. who will decide if further referral to a global

64 WPP ANNUAL REPORT 2019 SUSTAINABILITY STRATEGIC REPORT

LEADING THE CHARGE AGENCY FAMOUSGREY

CLIENT VOLVO

Volvo asked FamousGrey to help them answer this question: what is the use of driving electric if you do not charge your car with green energy? To help meet this challenge, the agency created Volts by Volvo, a new energy contract for homes which provides 100% green electricity, so that drivers are not only using electric cars, but also charging them with green energy. And with the energy generated from both wind and solar and provided by green energy expert Eneco, the result is clear: no impact, zero emissions.

7.5m Belgians reached (population 11 million) 71% said they would re -evaluate their electricity contract in a post -campaign survey 1 in 4 drivers of electric cars engaged with the Volts by Volvo platform

April 2019-January 2020

WPP ANNUAL REPORT 2019 65 STRATEGIC REPORT SUSTAINABILITY

SOCIAL INVESTMENT

Charities and non-governmental organisations (NGOs) do vital work, often with limited resources. We can help boost their impact by providing communications and creative services on a pro bono basis (for little or no fee).

This work is mutually rewarding. While SOCIAL IMPACT enabling our voluntary sector clients to Our support helps charities and NGOs to £92m £291m raise money and awareness, recruit continue and grow their work in critical areas wider social wider social members, and achieve campaign objectives, such as improving health and education, benefits created benefits from pro bono work also provides opportunities reducing inequality and protecting human by pro bono work pro bono work, for our people to work on fulfilling and often rights. Pro bono work is often worth more in 2019 charitable award-winning campaigns that raise the than an equivalent cash donation as it raises donations and free profile of our companies. awareness of our partners’ work while media space in 2019 helping to increase donations, recruit WHAT WE GAVE IN 2019 K members, change behaviour and achieve Our pro bono work was worth £10.6 million campaign goals. We have conducted in 2019 (2018: £11.3 million), for clients research to quantify this wider impact. including UN Women and WildAid. Our most recent analysis shows that in 2019 We also made cash donations to charities of our pro bono work created wider social Read our Quantifying our impacts report and see more examples of our pro bono work in our £5.2 million (2018: £5.7 million). This resulted benefits worth £92 million (2018: £91 million). Sustainability Report 2019. in a total social investment of £15.8 million This includes, for example, the impact of (2018: £17.0 million), equivalent to 1.60% of charities being able to improve health and reported pre-tax profits (2018: 1.35%). wellbeing in communities. Adding in our wpp.com/sustainability charitable donations and free media space as WPP media agencies negotiated free media well as our pro bono work, the wider social space worth £18.9 million on behalf of pro benefits created in 2019 were worth an bono clients (2018: £23.8 million), making estimated £291 million (2018: £331 million). our total social contribution for the year £34.7 million (2018: £40.8 million). COMMON GROUND INITIATIVE Good communications are essential to bring VOLUNTEERING K about the shift in attitudes and behaviour In addition to providing donations and pro needed to end extreme poverty, inequality bono services, we encourage our people and climate change by 2030. Common to volunteer their time. Half of our companies Ground is a collaboration between the have formal volunteering policies in place world’s six largest advertising and marketing (2018: 41%), and 61% (2018: 54%) organised services groups and the United Nations, volunteering activities for their people created to serve that purpose. during 2019. For example, VMLY&R celebrated its first anniversary in September We work directly with the UN through our by closing all 82 offices so its 6,500 people Common Ground initiative, partnering with could volunteer to support their local UN Women to tackle gender inequality. communities, a celebration that will be repeated each year. The greatest contribution we can make towards the SDGs is through our client and pro bono work.

66 WPP ANNUAL REPORT 2019 SUSTAINABILITY STRATEGIC REPORT

CODE OF CONSCIENCE AGENCY AKQA

CLIENT NGOs WORLDWIDE

A third of the world's protected nature reserves are under threat, with illegal deforestation a leading cause. Alongside a group of global NGOs, AKQA launched Code of Conscience: open source software that restricts the use of heavy-duty vehicles in protected areas. The code is available for free and, for the first time, gives heavy-duty vehicle manufacturers the opportunity to be part of the solution to illegal deforestation. An invitation comprising the Code of Conscience chip embedded in a wooden sculpture of an endangered animal has been sent to the CEOs of the world’s top-ten construction equipment manufacturers, with a vision for all new machines to leave the factory with Code of Conscience pre-installed. 10 manufacturers sent the code 2 countries considering making the code law 100+ coverage in over 100 countries, sparking positive change

WPP ANNUAL REPORT 2019 67 STRATEGIC REPORT SUSTAINABILITY

ATTRACTING AND RETAINING TALENT

The insights, creativity, and expertise of our people are what bring our clients to our door. Our success depends on hiring and retaining the brightest, most forward-thinking people with the best and most original ideas.

SKILLS, TRAINING AND DEVELOPMENT K ENGAGEMENT AND FEEDBACK K By investing in training and development, We use formal and informal mechanisms to we strengthen our creative, technical and assess and improve employee engagement leadership skills. Providing our people and satisfaction. with opportunities for training and for professional and personal development Employee surveys help us assess and act on also helps keep them engaged in their engagement and satisfaction levels. In 2020, work and with the Company. we will launch our first Company-wide employee survey. We conducted the first In 2019, we spent £38.7 million on training inclusion survey in the UK this year and are (2018: £36.6 million) and 66% of our people currently analysing the results. took part in an average 11 hours of formal training per person. In addition, almost The vast majority (95%) of our companies 60,000 people accessed online courses carry out exit interviews with leavers, which through LinkedIn Learning (previously often provide helpful feedback on our Lynda.com), which provides access to culture and practices. thousands of courses via desktop or mobile devices. To ensure our Board understands the views of our employees on WPP’s purpose, values We follow up with training participants to and strategy, in 2019 we established our first assess the effectiveness of a course and People Forum in the UK. Sponsored by our whether it has helped improve performance UK Country Manager, the Forum has at work. representatives from across our UK business who gather feedback from their agencies Development needs are assessed during to feed up to the WPP Board. The Board also a formal appraisal process. In 2019, 86% consults the Forum on key people issues. In (2018: 87%) of our people had a formal 2020, we will roll out an India People Forum appraisal, including 360-degree appraisals representing employees from Mumbai, Delhi for 65% (2018: 66%) of executive leaders and Bangalore. and 64% (2018: 66%) of senior managers.

Our people can find new roles within our companies in the UK, China and Singapore using our online job board, Springboard. In 2019, 24% (2018: 23%) of vacancies were filled by people already working within the Company.

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LABOUR RELATIONS K GENDER BALANCE K GEER IERSIT We support the rights of our people to join Our overall workforce has an equal gender trade unions and to bargain collectively, balance and 50% of our senior managers are Board and Executive although trade union membership is not women (2018: 49%). During the year the 37% (1,513) 63% (2,577) 2019 particularly widespread in our industry. proportion of women in executive leadership In 2019, around 5% of our employees were roles increased slightly to 37% (2018: 36%). At 36% (1,452) 64% (2,614) 2018 either members of a trade union or covered Board level, the proportion of women is 40%, Senior Managers by a collective bargaining agreement (2018: compared with 33% in 2018 and a FTSE 100 50% (8,689) 50% (8,578) 2019 6%). We held 1,507 consultations with works average of 32.4%. We aim to reach parity. councils, mainly in Europe (2018: 476). 49% (8,474) 51% (8,792) 2018 In 2019, WPP joined the 30% Club, a All other employees We have made around 3,500 redundancies campaign group of Chairs and CEOs taking as part of our transformation programme, as action to increase gender diversity on 57% (47,625) 43% (36,118) 2019 we merge and restructure some agencies boards and management teams to a 56% (47,131) 44% (36,630) 2018 and as a result of changes in our client base. minimum of 30% female representation. We aim to support affected people through Total employees our employee assistance programmes. We remain a committed signatory of the 55% (57,827) 45% (47,273) 2019 Women’s Empowerment Principles, a guide INCLUSION AND DIVERSITY for businesses on how to empower women in 54% (57,057) 46% (48,036) 2018 Different backgrounds and perspectives are the workplace, marketplace and community. what drive creativity. A diverse and inclusive We are also a proud partner of UN Women, Female Male workplace is essential to our daily work and which is a significant beneficiary of our pro our long-term success. We work hard to bono work. AGE IERSIT make all our people feel valued and fulfilled at work, regardless of gender, ethnicity, age Our WPP Stella network expanded to France 19 or under <1% or disability. and the United States in 2019, in addition to 20–29 37% being active in India, Italy, Mexico, South 30–39 37% WPP does not tolerate harassment, sexual Africa, Taiwan and the UK. It aims to tackle 40–49 17% harassment, discrimination or offensive barriers that may prevent women progressing 50–59 7% 60 and over 1% behaviour of any kind. We select and promote to the most senior roles. It runs events, our people based on their qualifications and networking opportunities, coaching and merit, without discrimination or concern for training and maintains a speaker database factors such as race, religion, national origin, to raise the internal and external profile of colour, sex, sexual orientation, gender our senior women. identity or expression, age, or disability. Our Code of Business Conduct sets out this commitment, applies to all our people and is available on our website, in our Policy Book and on our intranet. Our online ethics training, How We Behave, covers diversity and unconscious bias.

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DISABILITY HEALTH, SAFETY AND WELLBEING K DAYS LOST DUE TO SICKNESS We recruit, select and promote our people Supporting our people’s physical and mental 3.9 3.8 on the basis of their qualifications, relevant health and wellbeing is good for our people 3.1 experience, and merit, without discrimination and good for business. The main health and or concern for disability. Candidates are safety hazards in our business are work- 417,707 404,381 assessed objectively against the requirements related stress and ergonomic injuries. 71% of 330,264 of the job, taking account of any reasonable our companies employ someone responsible adjustments that may be required for for health and safety management candidates with a disability. For people (2018: 78%). There were no work-related who develop a disability during their fatalities in 2019. employment, we make adjustments to their 2017 2018 2019 working environment or other employment The range of programmes on offer in our arrangements wherever possible, within a businesses include fitness facilities and Days lost due to sickness reasonable time frame and in consultation subsidised gym memberships; health and Days lost per person with the employee. nutrition services, including health insurance and medical assessments; counselling and As an inclusive business we have signed employee assistance services; and ergonomic up to the Valuable500, a global initiative risk assessments and specialist equipment. that is putting disability on the boardroom agenda and celebrating inclusion among MENTAL HEALTH 500 influential businesses. As part of our Work-related stress is one of our main commitment, we launched our new – and growing – health and safety hazards. Inclusive Experience Practice, which helps Though having good policies and procedures brands to reach and be relevant to the in place for managing mental-health issues widest market possible by making their is important, we also need a working culture communications, products and services where people feel able to discuss concerns inclusive and accessible. and seek support. In countries where very long working hours are the norm, our FLEXIBLE WORKING AND companies need to take additional measures. PARENTAL LEAVE K These can include overtime restrictions Flexible working can make work accessible and monthly management reviews of to a broader pool of talent, including parents overtime worked. and people with caring responsibilities, helping to create a more diverse and engaged workforce. We estimate 24% of our workforce had flexible working arrangements in place in 2019, such as part-time working, flexible hours and home working, as well as career breaks and sabbaticals (2018: 25%). More than half (55%) of our companies offer parental leave benefits that exceed local legal requirements (2018: 48%).

To learn more about our programmes, including information about our training programmes and our development programmes that support our senior and mid-level women, download our Sustainability Report 2019.

wpp.com/sustainability

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INTO THE SPOTLIGHT AGENCY WUNDERMAN THOMPSON CLIENT LUX (UNILEVER)

Despite changing attitudes towards women and work in Saudi Arabia, only 16% of the workforce is female. The Unilever brand Lux turned to Wunderman Thompson to highlight women when people searched online for male-dominated jobs.

The agency launched #IntoTheSpotlight on International Women’s Day and used paid search results on Google to profile leading women in the relevant fields. Linking to content on Mira, a joint venture between Unilever and Vice, this meant when someone searched for “photographers” it took the user to videos and information about leading fashion photographer Huda Beydoun.

15-20% increase in inquiries for the featured professionals

870,000 people reached across Saudi Arabia on International Women’s Day 2019

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ENVIRONMENT

We support urgent action to tackle the climate crisis and aim for net zero carbon emissions in our Campuses by 2025.

OUR CLIMATE STRATEGY K TASKFORCE ON CLIMATE-RELATED –– phasing out plastics that cannot be We recognise the major threat that climate FINANCIAL DISCLOSURES reused, recycled or composted across change and environmental degradation pose We support the Taskforce on Climate-related all of our 3,000+ agency offices and to global social and economic development. Financial Disclosures (TCFD) and are Campuses worldwide by the end of 2020; We support urgent action to tackle the developing our disclosures in line with its –– signing up to the New Plastics Economy climate crisis through the Paris Agreement. recommendations. The TCFD seeks to Global Commitment led by UN encourage businesses to disclose climate- Environment and the Ellen MacArthur Our environmental management related risks and opportunities and is Foundation which aims to unite businesses, programmes are reducing our carbon structured around four themes: governance, governments and other stakeholders emissions and broader environmental strategy, risk management, and metrics behind a common vision for a plastics impact, while helping us to identify and and targets. system that works; and mitigate climate-related risk. These –– pledging to work with clients and partners programmes reduce costs and business For our second TCFD disclosure, see pages 196 to drive consumer change at scale. risks, while meeting our clients’ and and 197. colleagues’ expectations. For our carbon emissions statement, see page 199. Phasing out single-use plastics across our offices is an ambitious goal but our greatest In 2019, 25% of our floorspace was certified CIRCULAR ECONOMY impact is through our client work. We have to advanced sustainability standards such as In 2019, WPP committed to take the “plastic” worked with more than 60 clients to help LEED and BREEAM, meeting our 2020 target out of “Wire and Plastic Products” (the them reduce their own single-use plastics use, a year early. original name of the Company) by: on briefs ranging from product and packaging design and innovation to consumer engagement and behaviour change.

PERFORMANCE SUMMARY

SCOPE 1 AND 2 MARKET BASED K CARBON OFFSETS PURCHASED EECTRICIT RO REEAE K TONNES CO2e EMISSIONS PER PERSON tCO2e SORCES % 100 2.0 Headcount intensity 89,518 85,459 Target headcount intensity 1.5 65,014

1.0 32 35 0.60 26 0.5 4.87 0.41

07 11 15 19 23 27 30 2017 2018 2019 2017 2018 2019 2025 target

Our scope 1 and 2 market-based emissions for 2019 Since 2007 we have purchased and permanently We increased the percentage of electricity purchased

were 0.60tCO2e/head, a 21% reduction from 2018. retired 1.55 million carbon credits to offset our from renewable sources to 35% (2018: 32%), making Our carbon intensity per £1 million revenue was carbon emissions from air travel. We offset 100% substantial progress towards our 50% target.

4.87 tCO2e/head, a 22% reduction since 2018. of our air travel emissions in 2019.

TARGETS AND COMMITMENTS 0.41 Net zero 100% 100% tonnes of CO2e per employee by carbon emissions in our renewable electricity by 2025 of emissions from air travel offset 2030, a 50% reduction from 2017 Campuses by 2025 in line with RE100 through the purchase of high-quality carbon credits since 2011

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CHALLENGING 13bn MEATY NORMS impressions AGENCY DAVID 10yrs CLIENT best -selling BURGER KING product launch in 10 years In the United States, animal farming is responsible for half of the carbon emissions released into the $140m atmosphere, even if it is only in earned media responsible for 3% of the calories in our diet (LCA Impossible Foods 2019). When Burger King wanted to reduce the environmental impact of the 89% Whopper, they turned to DAVID reduction in GHG to help get meat-eaters to try emissions achieved by each Impossible something new. The Impossible Whopper compared Whopper looks, smells and tastes to meat-based just like a Whopper should, but the equivalents plant-based patty delivers that same great Whopper taste with an 89% April 2019 drop in carbon emissions. It is almost impossible to believe that helping the planet could taste so good.

EVERYDAY CLIMATE ACTION AGENCY H+K STRATEGIES

CLIENT DOCONOMY

When Swedish fintech Doconomy wanted to find an innovative solution to addressing the climate crisis, they turned to H+K Strategies. Alongside RBK Communication, H+K helped them create DO Black: a credit card with a carbon emission limit, which stops you from overspending not based on available funds but on the impact caused by your consumption. It blocks transactions exceeding the

CO2 limit, disables the credit card and notifies the cardholder, giving people a real feel for their carbon footprint. $100m in earned media 80+ banks and credit card companies discussing collaboration

To learn more about our approach to environmental management, 10,000+ our full performance and our approach registered users to carbon emissions accounting, in Sweden download our Sustainability Report 2019. Winner wpp.com/sustainability Cannes Grand Prix and a silver Lion

April 2019-January 2020

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SUPPLY CHAIN

We expect the companies we work with to meet high ethical, human rights, workplace and environmental standards. However, with over 130,000 companies in our supply chain, some risks will remain. We endeavour to mitigate these risks.

Our Group procurement team is led by our SUPPLIER SELECTION Our most direct impact on human rights new Chief Procurement Officer and manages We evaluate potential new suppliers on is as a major employer. We recognise the centrally negotiated contracts with preferred factors such as assurance of supply, quality, rights of our people, including those relating suppliers. A significant proportion of service, cost, innovation and sustainability. to freedom of association and collective additional procurement is delivered through To continue to strengthen our due diligence, bargaining, and we do not tolerate harassment contracts negotiated by budget holders in 2019 we completed the roll-out of two or any form of forced, compulsory or child within our operating companies. additional supplier pre-selection labour. Human rights are included in the questionnaires across 12 of our largest ethics training completed by all employees, In 2019, we commissioned an independent markets. Any “flags” raised in this process which we updated during the year as part consultancy to assess the maturity of our are immediately sent to the global of a wider commitment. supply chain management policies and sustainability team for investigation before processes. Following this evaluation, our any further onboarding takes place. See attracting and retaining talent, from page 68 Chief Procurement Officer is leading a complex programme of activities designed SUPPLIER DIVERSITY We work with clients to manage any human to evaluate and implement a modernised We work with many small and diverse rights risks from marketing campaigns, for procurement ecosystem and infrastructure. suppliers and this can be a source of new example by protecting children’s rights in Working with Group Procurement, the ideas and creativity. In the United States, relation to marketing. WPP companies will sustainability team is conducting an around 1.6% of spend (2018: 2.1%) is not undertake work designed to mislead on exploratory project on how to embed new with certified diverse suppliers including human rights issues. controls and processes to develop a more women- and minority-owned businesses. mature responsible sourcing programme. MODERN SLAVERY HUMAN RIGHTS We do not tolerate any form of modern SOURCING STANDARDS Respect for human rights is a fundamental slavery in our business or supply chain. Our expectations of suppliers are set out principle for WPP. We aim to prevent, in our Supplier Code Of Conduct, which identify and address any negative impacts WPP recognises the prevalence of modern includes requirements relating to labour on human rights associated with our slavery across all countries. We aim to practices (such as anti-harassment and business activities. implement appropriate measures to mitigate discrimination, and health and safety), human the risk of it occurring, either in our own rights (including modern slavery issues such We look for opportunities to promote human operations or those of our partners. To this as child, forced or bonded labour), social rights, in areas such as our pro bono work. end, we are working with a transnational impacts (such as anti-bribery and corruption) crime consultant to help us re-evaluate our as well as other sustainability issues. Our Human Rights Policy Statement approach to managing modern slavery risks Our Code requires suppliers to apply similar summarises our approach. It reflects within our supply chain. standards to companies within their own international standards and principles, supply chain. including the International Bill of Human In 2019, we updated our Global Supplier Rights, the UN Guiding Principles on Business Agreement to include a specific clause and Human Rights, the International Labour relating to modern slavery. Organization’s Declaration on Fundamental Principles and Rights at Work and the Children’s Rights and Business Principles. To learn more about our Supplier Code of Conduct, Human Rights Policy, and Modern Slavery Act We are a member of the United Nations Transparency Statement see: Global Compact and report progress against its 10 principles annually. wpp.com/sustainability/ policies-and-resources

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THE POWER OF PEN ON PAPER AGENCY GREY

CLIENT AMNESTY INTERNATIONAL

Amnesty International wanted to show Indonesians that a single signature can make a big impact. So Grey created Signature, a poster series chronicling the role petitions can play in ending human rights violations such as child marriage and gender-based violence, and calling for Indonesians to take action by putting pen to paper. 25% increase in signature pledges to Amnesty International Indonesia

October-December 2019

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TRANSPARENCY AND TRUST

We can reduce risks to our business and MANAGEMENT AND COMPLIANCE Acquired businesses must adopt our clients by establishing clear policies and Our Group Chief Counsel and Head of policies and their people must undertake procedures in areas such as data security, Sustainability oversees our approach to our ethics training within a month of joining ethical conduct, supply chain management, ethics and compliance. Senior managers WPP. This is agreed in an integration plan and human rights, and by being transparent in all our companies and our business and before the acquisition is finalised, and we about our progress. supplier partners are asked to sign a copy monitor progress. of the WPP Code of Business Conduct each OUR CODE OF CONDUCT year to confirm they will comply with its PUBLIC POLICY Our policy framework and training set principles. Our newly established Board-level Most of our public policy activity is work clear ethical standards for our people Sustainability Committee and Executive that our public affairs businesses carry out and companies. Committee sustainability working group for clients, including direct lobbying of provide additional oversight and guidance public officials and influencing public The WPP Code of Business Conduct on any ethical issues that may arise. opinion. On occasion, we also advocate summarises our principles and the key on issues that affect our business. policies that apply to everyone at WPP. Our people can report concerns or It is underpinned by more detailed policies suspected cases of misconduct We believe that business can make a on anti-bribery and corruption, hospitality confidentially through our independently valuable contribution to public policy and gifts, facilitation payments, the use managed Right to Speak facility, which is debate, but that to protect the public of third-party advisors, human rights and overseen by our legal and business integrity interest it is important to conduct all sustainability. In 2019, we implemented team departments and is available via phone lobbying with integrity and transparency. a new Disability Policy. or email in local languages. We publicise the facility in induction packs, on our intranet, The majority of work undertaken by our We require our people to take our online in the WPP Policy Book and via our ethics public affairs companies takes place in the ethics training, How We Behave, on joining training. In 2019, we received 361 reports United States and the EU, although many and then on a regular basis, including after (2018: 200) via Right to Speak, all of which clients are multinational businesses each update (at least every two to three were followed up, investigated where operating in many countries. years). Topics include diversity, human rights, appropriate by our legal, business integrity conflicts of interest and avoiding misleading and internal audit teams, and reported to OUR STANDARDS work. More than 57,000 employees the Audit Committee. Our Code of Business Conduct and our completed the training in 2019. In 2020, Political Activities and Engagement Policy How We Behave will be refreshed and new ASSOCIATES, AFFILIATES AND govern our political activities, and both are modules will be introduced on sustainability ACQUISITIONS available on our website. These documents and business integrity. We expect associate companies (those in commit us to acting ethically in all aspects of which we hold a minority stake) and affiliate our business and to maintaining the highest Our online training on anti-bribery and companies (preferred partners to whom standards of honesty and integrity. Political corruption covers the requirements of the we may refer business) to adopt ethical activities in particular should be conducted Foreign Corrupt Practices Act and UK Bribery standards that are consistent with our own. legally, ethically and transparently and all Act, including issues such as hospitality and related communication should be honest, gifts, facilitation payments and the use of Our due diligence process for acquisitions factual and accurate. Our policies apply to third-party advisors. and expansion into new markets includes a all companies and employees at all levels. review of ethical risks including those relating to bribery and corruption, human rights or Many of our companies are members of ethical issues associated with client work. professional organisations and abide by their codes of conduct. Examples include We identify any specific human rights risks the UK Association of Professional Political 57,000+ associated with different countries of Consultants (APPC), and the European Public people completed ethics operation, using sources such as the Affairs Consultancies’ Association (EPACA). training in 2019 Transparency International Corruption Index, Human Rights Watch country reports and government guidance.

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WPP companies comply with all applicable POLITICAL CONTRIBUTIONS Our companies contribute to public policy laws and regulations governing the WPP companies are not permitted to make debate in areas where they have expertise and disclosure of public affairs activities. In the direct cash donations. Other political a special interest. Our digital and research United States, this includes the Lobby donations can only be made with the prior companies, for example, are involved in Disclosure Act and the Foreign Agent written approval of a WPP executive privacy and data protection issues. Registration Act, which are designed to director. Donations must be reported to achieve transparency on client representation WPP legal before they are made, to confirm WPP companies must implement clear and require lobby firms to register the names they comply with this policy and to obtain procedures for employing serving or former of clients on whose behalf they contact the necessary approvals. politicians, including a six-month “cooling- legislators or executive branch personnel. off” period for people joining WPP from A number of our companies are listed on POLITICAL ACTION COMMITTEES public office or the public sector. the voluntary EU Transparency Register of In countries where it is consistent with lobbying activities. applicable law, individuals working at WPP MEMBERSHIP OF TRADE ASSOCIATIONS companies may make personal voluntary We are members of trade associations, Our companies in the United States whose political contributions directly to candidates industry groups and membership sole or primary business is lobbying have for office. Several of our businesses, organisations which undertake lobbying representatives of both major political including Burson Cohn & Wolfe/Prime Policy activity on behalf of their members. We parties among senior management. and Glover Park Group, also maintain political select organisations with priorities and action committees (PACs) which accept values aligned with our own and with robust We will not undertake work that is intended voluntary donations from their people to governance processes. WPP companies to mislead and always seek to identify the support political candidates. In 2019, these must nominate a senior manager to manage underlying client before taking on work. We PACs made disbursements worth $128,295 and oversee trade association relationships. do not knowingly represent “front groups” (data from fec.gov). Memberships are listed in our Sustainability which purport to be independent campaign Report 2019. groups but are in fact controlled by another LOBBYING AND POLITICAL ADVOCACY organisation for the purpose of misleading. We occasionally contribute to the debate on public policy issues relevant to our business, Our Group Chief Counsel and Head of sometimes through our public affairs Sustainability has responsibility for developing companies. and implementing our political activity policy and public reporting procedures. We advocate on sustainability issues, The CEO and CFO in each country or region through partnerships such as the Common are responsible for implementing our policy Ground initiative in support of the UN at the local level. Sustainable Development Goals. In 2019, Demet İkiler, WPP Country Manager for Any third parties conducting political Turkey and EMEA CEO of GroupM, joined the activities on behalf of WPP or its companies local board of the UN Global Compact with must comply with our Political Activities responsibility for diversity and inclusion. and Engagement Policy. Third parties are Karen Blackett OBE, WPP UK Country required to complete the WPP ethics training Manager, serves as the UK Government’s or equivalent within their own organisation. Race at Work Champion, supporting the Race at Work Charter.

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PRIVACY AND DATA ETHICS

More than ever, data underpins, drives Our Group Chief Privacy Officer leads our We will relaunch our mandatory global and contributes to the work that we do work on privacy, supported by our Data Privacy and Data Security Awareness online for our clients. We use the term “data” in Protection Officer. Together, they provide training in 2020. There will be updates to its broadest sense, to include client data, practical guidance and support to our both the style and content of the training, consumer data, and all information and data agencies on data ethics, ensure that privacy making it more engaging and relevant and related to the operating of our businesses. risks are well understood across the ensuring our people are well-trained in our business, help us prepare for relevant new data responsibilities as a company and in We require all our people to operate in line regulation, and promote best practices. their individual roles. Our team also with our Data Code of Conduct. This contains continues to run face-to-face training to the underlying principles that: WPP, its Our networks and companies have appointed reflect specific topics or regulations; for companies and its people are committed to privacy leads to oversee the implementation example, we have trained over 1,000 of our the responsible collection, management, use of our policies at a local level. They report employees on the new California Consumer and protection of data; and we recognise our progress via our Group Chief Counsel and Privacy Act. obligations to all stakeholders, including Group Chief Privacy Officer. shareholders, clients, our own people, We work with clients to share insights and suppliers and consumers. AUDIT AND DUE DILIGENCE privacy best practices, demonstrating how Our company-wide audit programme we apply these across the Group and in the We focus on building our people’s awareness includes controls reflecting the technical work we undertake for them. Our people and knowledge so everyone understands and organisational measures in place to have access to a range of resources to and takes responsibility for data privacy and protect data, as well as specific data privacy support them in these conversations, and our security. We have robust standards and controls. Our internal audit team runs a Data Privacy and Security Charter is written governance processes in place to reduce rolling programme of audits across our in a way that can be shared with clients. risks and comply with regulation. We partner companies to review privacy risks and with clients, peers and industry organisations practices using these controls. As regulations continue to evolve, we to promote best practice. partner with clients, industry organisations Suppliers who collect, manage or store and peer companies on privacy and data In 2020, the focus will continue to increase employee, consumer or client data on behalf protection issues, particularly with advertising on data ethics, artificial intelligence and of WPP, our companies and our clients must bodies in the regions in which we operate machine learning, and privacy by design, have the right data security and privacy such as the Internet Advertising Bureau (IAB) particularly as the availability and possible standards in place. We conduct due diligence in Europe and the United States, and the UK applications of data increase across all areas on data suppliers and embed privacy Advertising Association. of our business. requirements in our supplier contracts. DATA HEALTH CHECKER POLICIES AND GOVERNANCE TRAINING AND ENGAGEMENT We use our Data Health Checker to review Since the launch of the WPP Data Privacy and We continue to enhance our Safer Data privacy risks and data security practices in Security Charter in 2018, we have issued platform, which is a well-used resource our businesses. This provides insight into incremental updates to reflect regulatory across the Group. The platform provides how data is used, stored and transferred and changes and best practices, as well as information, guidance and resources to help helps to identify any parts of the business changes to our business. For example, the our people understand privacy risks and to that need further support on data practices. Charter now includes an Artificial Intelligence apply our policies in their work. The results show that the majority of our Statement to guide our people on its use. companies continue to have measures in The platform also includes our regulatory place that meet or exceed their level of The Charter helps us communicate our toolkits for GDPR, CCPA and LGPD, model privacy risk (the average risk score is 2.14, approach to data to our people and clients, data protection contract clauses, privacy where 5 is the maximum risk score). Of those setting out core principles for responsible impact assessment tools, policy templates companies surveyed, 80% have a dedicated data management through our Data Code of and other topic- or jurisdiction-specific privacy lead. Conduct, our IT security, privacy and social guidance and resources. media policies, and our security standards (which are based on ISO 27001).

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OUR APPROACH TO SUSTAINABILITY

EMBEDDING SUSTAINABILITY IN OUR We are included in the FTSE4Good Index and NON-FINANCIAL COMPANIES participate in the CDP Climate benchmark, INFORMATION STATEMENT WPP sets the sustainability policy for the receiving a rating of B in 2019 (2018: A-. For This section provides information Group with every company responsible for an explanation of this change, see required by regulation in relation to: implementation. We have a clear policy Sustainability Report, page 39). –– environmental matters (page 72 and TCFD Statement, pages 196 framework through our Code of Business and 197); Conduct, Sustainability Policy, Supplier Code OUR MATERIALITY PROCESS –– our people (pages 68-70); of Conduct, Data Privacy and Security Our first formal materiality assessment in –– social matters (page 66); Charter, Human Rights Policy Statement and 2014 included interviews with clients, –– human rights (page 74); and other policies included in the WPP Policy investors, NGOs, and sustainable business –– corruption and bribery (page 76). Book. We track progress using our social and experts, as well as senior executives in our environmental key performance indicators. Company functions and our operating In addition, other related information companies. We carried out further reviews can be found as follows: Our internal sustainability advisors are in 2016 and 2017. In 2019, we updated our –– business model (page 9); –– principal risks and how they are working to ensure consistent implementation materiality assessment in light of our new managed (pages 80-91); and of our standards. In 2019, we ran training for corporate strategy (see Sustainability –– non-financial key performance our top 200 global leaders on sustainability Report, pages 57 and 58). indicators (page 8). as a lever for innovation and growth. We also piloted an online resource hub to share best ABOUT OUR REPORTING practice across our companies and Data included in this review is for the encourage collaboration. calendar year 2019 and covers all subsidiaries of the Company. Some key environmental STAKEHOLDER ENGAGEMENT and people data is verified by Bureau Veritas, Dialogue with our stakeholders including an independent assurance provider (see our people, clients and investors provides Sustainability Report page 59). valuable feedback and insight into sustainability risks and opportunities, for our Company and our clients.

Most stakeholder engagement takes place in the course of doing business. We also carry out more formal research as part of our materiality process. We work with clients on sustainability issues (see page 64). Information on employee engagement is on page 68.

INVESTOR ENGAGEMENT Our involvement with investors, rating agencies and benchmarking organisations on sustainability during 2019 included: Bloomberg Gender-Equality Index; CDP; Ecovadis; Ethibel; Euronext Vigeo Europe; FTSE Russell; Human Rights Campaign Foundation’s 2018 Corporate Equality Index; ISS Data Verification; MSCI Research Inc; Sustainalytics; Thomson Reuters D&I index; Trucost; and Workforce Disclosure Initiative (WDI). To find further details, data, our materiality analysis and case studies, download our full Sustainability Report 2019.

wpp.com/sustainability

WPP ANNUAL REPORT 2019 79 STRATEGIC REPORT

ASSESSING AND MANAGING OUR RISKS

The success of our strategic objectives, The system of controls described below is for the accurate and timely monitoring as discussed in this report, depends to a designed to manage and mitigate, but may of exposures and certain risk types of significant extent on the steps we are able not eliminate, the risk of failure to achieve importance); compliance policies and to take to respond to the impact of the our strategic objectives and is not an practices; and risks that present themselves Covid-19 pandemic on the Group and how absolute assurance against material throughout each network. This agenda is we recognise and address the other current misstatement or loss. topped by our business integrity programme and emerging risks and uncertainties we and tailed by our control environment. face as a business. The extent of the RISK GOVERNANCE FRAMEWORK AND impact of Covid-19 will depend on future BUSINESS INTEGRITY PROGRAMME In order to carry out their duties developments which are highly uncertain A key element of our risk governance comprehensively, each Risk Committee and cannot be predicted. framework is our Risk Committees. Each has secure access to a central pool of data network has a global Risk Committee from their network that is crucial to the The Board, assisted by the Audit Committee, chaired by the CEO and with key senior ability to recognise and monitor a full risk has oversight and responsibility for our internal managers participating to ensure that and compliance picture; this includes control system which is structured through leadership has a full understanding of the internal audit reports, SOX results, general our three lines of defence model and risks across businesses and the remediation computing controls results, whistleblowing delivered through our risk governance steps required from time to time in certain data and the results of our annual framework, business integrity programme, markets. We also have a WPP Risk Committee assessment of business integrity risk. culture based upon the principles set out in which has oversight over all network Risk our Code of Conduct and our approach to Committees and itself reports into the WPP’S RISK GOVERNANCE FRAMEWORK risk management. Audit Committee. Our business integrity programme is integral to ensuring that the policies, procedures and The Board has reviewed the design and The agenda of the Risk Committees is to control environment set by the Board is effectiveness of this system during the year review, monitor and advise on: compliance understood and worked within across all and up to the date of this report and carried with laws, regulations, internal procedures, geographies and markets. It is produced by out a robust assessment of the impact of and industry standards, including anti-bribery mapping resources, systems and processes the Covid-19 pandemic, along with other and corruption matters; the implementation against WPP’s risk appetite (which the principal risks that are currently impacting of our compliance framework (including business integrity function helps the Board or could impact our business. setting clear standards and reporting lines and WPP Risk Committee to set), governance

WPP’S RISK GOVERNANCE FRAMEWORK

BUSINESS INTEGRITY PROGRAMME WPP Risk WPP Committee

CENERAL BUSINESS

INTERNAL AUDIT SOX COMPUTING WHISTLEBLOWING INTEGRITY RISK FINDINGS RESULTS CONTROLS ASSESSMENT Committees Network Risk Risk Network

CONTROL ENVIRONMENT

80 WPP ANNUAL REPORT 2019 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT

requirements and regulator expectations –– in terms of processes, conducting an includes How We Behave, Anti-Bribery & and then crafting actions from the results annual assessment of business integrity Corruption and Privacy & Data Security for both the business integrity team and risk, monitoring dynamic data feeds Awareness modules. In addition, we top the Risk Committees. (including our financials, internal audit up the online resource with in-person findings and SOX results), reviewing and training sessions, workshops and daily Actions for the business integrity team focus investigating whistleblowing reports support on the ground from our regional on tackling root causes of risk and include: and tracking remediation efforts. compliance directors and managers. The business integrity function also –– in respect of resources, bolstering POLICIES, PROCEDURES AND CULTURE houses an e-library of practical guides messages and examples from leadership The quality and competence of our people, and compliance FAQs. (including the Risk Committees) with their integrity, ethics and behaviour, and communications, training sessions, the culture embedded within our businesses The core of our Policy Book is our Code workshops and practical guidance for our are all vital to the maintenance of our system of Business Conduct, which is regularly people and providing “on the ground” of internal control which is maintained reviewed by the Board and sets out the support for day to day queries from and reviewed in accordance with the UK principal obligations of all of our people. our networks; Corporate Governance Code and FRC As a company and as individuals we have –– in respect of systems, advising on the guidance on risk management and a collective responsibility to behave in the implementation of WPP’s policies, internal control. right way, to live up to our values and to procedures and controls (including around conduct our business with integrity. Our internal reporting and approvals) and In order to help our people make the right Code outlines the commitments we make to providing a compliance lens for the design decisions, we provide a number of tools. each other, our business partners, and others and structure of our enterprise resource The baseline reference of our policies and with a stake in what we do. The principles planning (ERP) environment; and procedures is set out in our Policy Book, of the Code are embedded in our training internal control bulletins and accounting courses and workshops and our senior guidelines. To communicate these managers are required to sign it each year. effectively, we require all employees to complete an online training course upon Our Anti-Bribery & Corruption Policy joining and at regular intervals which prohibits any form of bribery across the Group and is supported by the Advisor Payment Policy which restricts the use of advisors and details the due diligence that must be undertaken in the limited cases where advisors may be used. Our gifts and entertainment policy sets limits on values WPP’S BUSINESS INTEGRITY PROGRAMME that may be given or received, supported in each company by a gift register.

RESOURCES Our Code of Conduct for suppliers replicates Our people – everyone is accountable all of these obligations in our supply chain. Leadership Our Policy Book also includes required Communications, training and guidance practices in many operational, tax, legal “On the ground” support and human resource areas. SYSTEMS OUR RISK APPETITE The application of our policies and ERP environment GOVERNANCE REQUIREMENTS Policies, procedures and controls procedures is monitored within each Financial reporting company and by the internal audit, legal REGULATOR EXPECTATIONS Internal reporting and approvals and business integrity functions. Breaches are investigated by our legal and business PROCESSES integrity teams and, where appropriate, Business integrity risk assessment external advisors. Monitoring dynamic data feeds Whistleblowing The Compensation Committee continues Know your client and due diligence Certifications to review how the Group’s performance Remediation – and root causes rewards support the risk management and Disciplinary measures and incentives internal control systems.

WPP ANNUAL REPORT 2019 81 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS

RIGHT TO SPEAK RISK IMPACT FROM RIGHT TO SPEAK FINANCIAL REPORTING WPP’s Code of Conduct sets out our REPORTS 2019 Each company annually updates a three-year responsibilities to our people, partners All Right to Speak reports are received strategic plan, which incorporates financial and shareholders to act ethically and with by the Group Chief Counsel and General objectives. These are reviewed by executive integrity. We want to embed a culture of Counsel, Corporate Risk. Each report is management and are agreed with the Chief integrity and transparency and one in which logged, investigated and tracked through Executive of the relevant company. our people recognise that doing the right to a conclusion including any remediation thing is good business. or follow-up actions that might be required. We operate a rigorous procedure for the development of company budgets, which Part of this culture is making sure that our Reports are also analysed for risk impact and build up the Group’s budget. During the final people have confidence to speak up and root causes. Learnings generated from this quarter of each financial year, operating raise concerns with their managers or analysis are converted into recommendations companies prepare detailed budgets for the supporting teams or through their employee including for training sessions, workshops following year for Group review. The Group’s forums or our Right to Speak hotline (which and practical resources by WPP’s business budget is reviewed by the Board before is confidential and allows for anonymity) integrity function and then implemented being adopted formally. Company results are if they experience or are concerned about together with the support and input of the reported monthly and are reviewed locally, behaviour which conflicts with our Code. Risk Committees. regionally and globally by the business groups and by Group management on a WPP is continuously raising awareness of The nature of each report, action taken and consolidated basis and ultimately by the these channels to our people and other outcome is reported to the Audit Committee Board. The results are compared to budget stakeholders and as a result there has been and the approach and process are reviewed and the previous year, with full-year forecasts a steady increase in the number of reports by the auditors. prepared and updated quarterly throughout received over the past few years. In 2019, the year. a total of 361 reports were received via the WPP is committed to providing a safe and Right to Speak hotline. The most commonly confidential way for people with genuine At each year-end, all companies supply their raised concerns were about respect in the concerns to raise them, and to do so without full-year financial results. This information is workplace and protection of WPP’s assets. fear of reprisals. WPP does not tolerate any consolidated to allow the Group to present retaliatory behaviour against individuals the necessary disclosures for International reporting concerns and is equally committed Financial Reporting Standards (IFRS) as to preserving the anonymity of an individual adopted by the European Union and issued who makes a report and does not wish to by the International Accounting Standards have their identity revealed. Board (IASB).

The consequences for misconduct or The Disclosure Committee gives further retaliation range from individual performance assurance that publicly released information is management, training for a business or an free from material omission or misstatement. office and one-on-one training or coaching for an individual through to staff relocation and staff dismissal.

TOTAL NUMBER OF RIGHT TO RISRISK IMPACTIPACT FROM RO RIGHT RIGT TO TOSPEAK SPEA REPORTS REPORTS SPEAK REPORTS %

361 People 69.8%

Financial 14.1% 200 Legal & regulatory 9.5%

107 Strategic 3.2% Operational 1.8% Clients 1.5% 2017 2018 2019 Data security & 0.1% IT resilience

82 WPP ANNUAL REPORT 2019 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT

RISK MANAGEMENT We use a “three lines of defence” model in relation to risk management:

1. COMPANY REVIEWS 2. EXECUTIVE MANAGEMENT REVIEWS In 2020 the Company also established a Each company undertakes monthly and The company reviews are formally Risk and Controls Group to drive continuous quarterly procedures and day-to-day communicated to executive management improvement in the Group’s control management activities to review their in monthly reports and quarterly review environment. The new function will focus operations and business risks, supported meetings and, in turn, to the Board. At each on internal financial controls, risk appetite by our policies, training and guidance on Board meeting, the management team controls and controls in change programmes. required internal controls over financial presents a business review of each of the reporting and monitoring controls and operations, including an assessment of the 3. INTERNAL AUDIT AND AUDIT reviews within their network. risks in each business, and details of any COMMITTEE OVERSIGHT change in the risk profile since the last The internal audit function, with Audit In addition, our companies must maintain Board meeting. Committee oversight and external resource and update documentation of their internal as required, provides an independent review controls and processes. This documentation The business review includes the possibility of risk management and internal control via incorporates an analysis of business risks, of winning or losing major business; internal audits and management of the detailed control activities and monitoring, succession and the addition or loss of a key testing programme for SOX. together with IT and financial controls and employee; regulatory changes; sustainability, controls over security of data and the including risks relating to marketing ethics, provision of timely and reliable information privacy, diversity and employment; political to management. instability; and changes in accounting or corporate governance practice. To add to The information collated feeds up to each this, the Board has tasked the WPP Risk network’s Risk Committee which uses it to Committee with the evolution of our assess and monitor current risk exposures, enterprise risk management process and identify new risk types and set future risk the implementation of new technology for strategy as well as compile it into a report monitoring and tracking risks across all and insights for the WPP Risk Committee businesses and markets. This new platform is and executive management. due to be rolled out through 2020 alongside refreshed risk appetite statements, drivers and tolerances which were reviewed by the Audit Committee during 2019. The resulting risk dashboard and map will feed into the regular risk discussions of the Audit Committee and the regular risk discussions of the Board.

LINES OF DEFENCE

FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE Functions that own and manage risk Functions that oversee or specialise in Functions that provide independent risk management and business integrity assurance, above all internal audit

THE NEWLY ESTABLISHED RISK AND CONTROLS GROUP IS PART OF OUR SECOND LINE OF DEFENCE.

OVERARCHING GOALS –– Driving continuous improvement in the Company’s control environment through strengthening ownership and accountability for internal controls by CEOs and CFOs at all levels of the organisation –– Driving culture change throughout the Company and improving understanding of internal controls –– Providing training and development as to “what good looks like” in relation to controls and demonstrating the value of good controls throughout the Company

WPP ANNUAL REPORT 2019 83 STRATEGIC REPORT ASSESSING AND MANAGING OUR RISKS

VIABILITY STATEMENT

RISK ASSESSMENT –– the Company’s ability to cover interest in accordance with its bank covenants. ASSESSMENT OF PROSPECTS payments on the Group’s debt, to issue However the long-term viability of the An understanding of the Group’s business bonds and refinance bonds as they fall Company could be impacted by other as yet model and strategy detailed on pages 9 and due given the potential impact of unforeseen risks and the mitigating actions 16 is central to understanding its prospects. Covid-19. that have been put in place in respect of the –– Other ongoing matters principal risks, could turn out to be less The Group’s business model, transformation –– the Group’s current position and effective than intended. programme and diversification across prospects; marketing services businesses which operate –– the ongoing transformation programme Having assessed the current position of the in 112 countries, with a broad spectrum of updated in this report; Company, its prospects and principal risks clients, technology partners and suppliers –– the changes taking place in our industry; and taking into account the assumptions and track record of setting up new –– the long-term impact of technological above, the Board has determined that they businesses, are all relevant to any disruption; and have a reasonable expectation that the consideration of prospects and viability. –– the ongoing simplification of the Group Company will be able to continue in structure and improving integrated operation and meet its liabilities as they The Directors assess the Group’s prospects service offering to clients. fall due over a period of three years from on a regular basis through the financial 1 January 2020. reporting and planning process, the business This period has been chosen as it extends one reviews at each Board meeting, quarterly year beyond our three-year transformation GOING CONCERN reviews of our businesses by the executive programme and strategic plan and aligns The Group’s business activities, together team and ongoing reviews of the Group’s with our three-year budget process and with the factors likely to affect its future profitability, cash flows and funding reflects the Board’s best estimate of the development, performance and position are requirements. The Board has considered future viability of the Company. In testing the set out in the Financial review on pages 52-57 the longer-term risks and opportunities for viability of the Company, we have undertaken and Principal risks and uncertainties on the Group discussed in the Strategic Report a robust scenario assessment of the principal pages 85-91. The financial position of the and the potential impact of competition for risks which could threaten the viability or Group, its cash flows, liquidity position and talent and competition from consulting firms, existence of the Company. The potential borrowing facilities are described in the technological disruption, climate change and impact of Brexit has been considered and it Financial statements and the Notes to the regulation. The Board has also considered is not deemed to have a significant impact financial statements include the Company’s the impact of the Covid-19 pandemic which on this assessment. In the scenario modelling objectives, policies and processes for is adversely affecting and is expected to of the principal risks, we have stress tested managing its capital; its financial risk continue to adversely affect our business and our forecast cash flows to reflect a range management objectives; details of its our clients’ and suppliers’ businesses across of possible adverse effects of the Covid-19 financial instruments and hedging activities; all of the countries in which we operate. pandemic on our business, clients and and its exposures to credit risk and liquidity The Group has experienced and expects people and the potential impact of one or risk. The Company’s forecasts and to continue to experience unpredictable more of the Group’s other principal risks projections, taking account of (i) reasonably reductions in demand for our services from occurring and leading to client loss, loss of possible declines in revenue less pass‑through clients in sectors impacted by the pandemic. reputation, contract breach, our inability costs; and (ii) remote declines in revenue to win new business, and the impact of less pass‑through costs for stress‑testing VIABILITY STATEMENT revenue less pass-through costs decline. purposes as a consequence of the Covid-19 The Directors’ assessment of the Group’s The Company’s forecasts and projections pandemic from April 2020 onwards viability for the next three years has been took account of (i) reasonably possible compared to 2019, considering the Group’s made taking account of: declines in revenue less pass-through costs; bank covenant and liquidity headroom and (ii) remote declines in revenue less taking into account the suspension of share –– Covid-19 pass-through costs for stress testing buybacks and the final dividend of 2019 and –– the uncertainty of the consequences purposes as a consequence of the Covid-19 cost mitigation actions which are and which and duration of the Covid-19 pandemic pandemic from April 2020 onwards could be implemented, show that the and mitigation strategies being compared to 2019; and considered the Company and the Group would be able to mandated by governments in impacted Group’s bank covenants and liquidity operate with appropriate liquidity and within countries; the adverse financial impact headroom including the suspension of share its banking covenants and be able to meet already being experienced by the buybacks and the final dividend in 2019 and its liabilities as they fall due. The Company Group, disruption to clients’ economic cost mitigation actions being implemented. modelled a range of revenue less pass‑through activity and client financial pressures cost declines from 15% to over 35%. The and the impact on our people caused The Company modelled a range of revenue Directors therefore have a reasonable by Covid-19; less pass-through cost declines from 15% to expectation that the Company and the –– the ongoing reviews, reduction in over 35%. In the most extreme scenarios Group have adequate resources to continue pitch activity as a consequence of tested, the Directors have considered the in operational existence for the foreseeable Covid-19 short-term notice periods or further actions that could be taken to future. Thus they continue to adopt the assignment nature of many of the client mitigate negative cash flow impact and going concern basis of accounting in engagements; the volatility of global ensure additional liquidity. The Directors preparing the financial statements. economic conditions and impact of a have assumed that the Company will be able global recession as a consequence of to refinance existing bonds and that trading the Covid-19 pandemic; and conditions will stabilise in 2021 and, as a result, the Company will continue to operate

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PRINCIPAL RISKS AND UNCERTAINTIES

The Board has carried out a robust assessment of the principal risks and uncertainties affecting the Group and the markets we operate in and strategic decisions taken by the Board as at 31 December 2019 and up to the date of this report including the adverse effects of the Covid-19 pandemic and which are described in the table on the following pages.

HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES COVID-19 PANDEMIC

The coronavirus pandemic is adversely affecting While we expect the impacts of Covid-19 to A strong balance sheet, supported further and is expected to continue to adversely affect have an adverse effect on our business, financial by action to maintain liquidity including the our business, revenues, results of operations, condition and results of operations, we are unable suspension of share buybacks and the 2019 final financial condition and prospects. to predict the extent or nature or duration of dividend. Cost reduction and cash conservation these impacts at this time. measures including freezing of new hires, 20% salary and fee sacrifice for CEO, Board, Executive Committee members and employees earning above certain thresholds, savings on property and IT capex. Constant monitoring of working capital position.

Close to 95% of our people are remote working and maintaining services to our clients and using creativity to support clients to adjust their communications, and support governments and NGOs in mitigating the impact of Covid-19.

STRATEGIC RISKS

The failure to successfully complete the three-year A failure or delay in implementing the Board oversight of the implementation of the strategic plan to return the business to growth by transformation plan and/or returning the business strategic plan and regular briefings on the the end of 2021 and simplify our structure. to growth may have a material adverse effect on Group’s response to the Covid-19 pandemic. our market share and our business, revenues, results of operations, financial condition or The Executive Committee formed in 2019 prospects. The Covid-19 pandemic is impacting regularly reviews progress against the strategic the implementation of the transformation plan, plan and actions required to deliver against the and we cannot predict the extent or duration plan and convenes regularly to discuss the Group’s of the impact. response to and implementation of the measures highlighted above to mitigate the impact of the Covid-19 pandemic on the Group’s operations, people, clients and financial condition.

The impact of the pandemic and focus on managing cost and changes in ways of working will accelerate aspects of the transformation as we move faster towards a simplified company structure and enhanced use of technology by our people as a consequence of adapting to remote working.

KEY

Increased risk

No change from last year

Reduced risk New risk in 2019

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HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES OPERATIONAL RISKS

CLIENTS The competitive landscape in our industry is Three-year transformation plan commenced in We compete for clients in a highly-competitive constantly evolving and the role of traditional December 2018. Emphasis on providing faster, industry which has been evolving and undergoing agencies is being challenged. Competitors more agile and more effectively integrated structural change and is being adversely include multinational advertising and marketing solutions for our clients. impacted by the Covid-19 pandemic. Client loss communication groups, marketing services to competitors or as a consequence of client companies, database marketing information and Simplifying our organisational structure such as consolidation, insolvency or a reduction in measurement, social media and professional the disposal of 60% of our interest in Kantar and marketing budgets due to recessionary economic services and consultants and consulting the disposal of non-core minority holdings. conditions or a shift in client spending would have internet companies. a material adverse effect on our market share, Launch of further Campus co-locations including business, revenues, results of operations, financial Client contracts can generally be terminated in Mumbai, Amsterdam and Madrid. Embedding condition and prospects. on 90 days’ notice or are on an assignment basis data and technology more deeply into our offer and clients put their business up for competitive to clients. review from time to time. The ability to attract new clients and to retain or increase the amount Board focus on the importance of a positive and of work from existing clients may be impacted if inclusive culture across our business to attract we fail to react quickly enough to changes in the and retain talent and clients. Creation of a team market and to evolve our structure, and by loss of focused on culture, diversity and inclusion across reputation, and may be limited by clients’ policies the Group. on conflicts of interest. Continuous improvement of our creative There are a range of different impacts on our capability and reputation of our businesses. clients globally as a consequence of the Covid-19 pandemic. In the short-term media spend has The development and implementation of senior largely remained committed or diverted to leadership incentives to align more closely with alternative channels but there is an increasing our strategy and performance. volume of cancellations. Project and retained work have continued in most sectors but activity Business review at every Board, Management and has begun to decline. New business pitches Executive Committee meeting to identify client continue where the process was already underway, loss. During the Covid-19 pandemic, a weekly but there is increased uncertainty in the future update to the management team on the status of pipeline. In the past, clients have responded to the Group’s major clients and upcoming pitches weak economic and financial conditions by for potential new clients. Continuous engagement reducing or shifting their marketing budgets with our clients and suppliers through this period which are easier to reduce in the short term than of uncertainty and reduction in economic activity. their other operating expenses. The risk of client loss or reduction in marketing budgets has increased significantly.

We receive a significant portion of our revenues A relatively small number of clients contribute Increased flexibility in the cost structure from a limited number of large clients and the a significant percentage of our consolidated (including incentives, consultants and net loss of one or more of these clients could revenues. Our 10 largest clients accounted for 15% freelancers). have a material adverse effect on our prospects, of revenues in the year ended 31 December 2019. business, financial condition and results Clients can reduce their marketing spend, Business review at every Board meeting and of operations. terminate contracts or cancel projects on short regular engagement at executive level with notice. The loss of one or more of our largest our clients. clients, if not replaced by new accounts or an increase in business from existing clients, would adversely affect our financial condition.

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HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES

PEOPLE, CULTURE AND SUCCESSION We are highly dependent on the talent, creative Our incentive plans are structured to provide Our performance could be adversely affected abilities and technical skills of our people as retention value, for example by paying part of if we do not react quickly enough to changes in well as their relationships with clients. We are annual incentives in shares that vest two years our market and fail to attract, develop and retain vulnerable to the loss of people to competitors after grant date. key creative, commercial and management (traditional and emerging) and clients, leading talent, or are unable to retain and incentivise to disruption to the business. We are working across the businesses to embed key talent as a consequence of the cost saving collaboration and investing in training and actions implemented to maintain liquidity To maintain our liquidity position through the development to retain and attract talented during the Covid-19 pandemic and reduction current crisis, cost reduction measures have people. The investment in co-located Campus in economic activity. already been taken which impact our people properties is increasing the co-operation across include freezing new hires, postponing salary our companies and provides extremely attractive increases for 2020 and reducing salaries or fees and motivating working environments. for the Board, Executive Committee, CEO and senior employees. Further additional measures Succession planning for the Chief Executive including reduced working hours or severances Officer, the Chief Financial Officer and key will also be required which may lead to executives of the Company is undertaken by challenges in retaining and attracting key the Board and Nomination and Governance talent during this period of disruption and Committee on a regular basis and a pool of at the beginning of a recovery. potential internal and external candidates identified in emergency and planned scenarios.

Compensation Committee oversight for the Group’s incentive plans and compensation.

Our first priority during the Covid-19 pandemic is the safety and welfare of our people and seeking to protect them as much as possible as well as the ability to serve clients and win new business as markets recover.

CYBER AND INFORMATION SECURITY We may be subject to investigative or The IT transformation programmes will underpin We are undertaking a series of IT transformation enforcement action or legal claims or incur fines, our three-year strategic plan and enhance our programmes to support the Group’s strategic damages, or costs and client loss if we fail to data security. plan and a failure or delay in implementing the IT adequately protect data. A system breakdown programmes may have a material adverse effect or intrusion could have a material adverse effect There is a rolling programme to retire servers on its business, revenues, results of operations, on our business, revenues, results of operations, across the Group and move to cloud solutions. financial conditions or prospects. The Group is financial condition or prospects and have an reliant on third parties for the performance of a impact on long-term reputation and lead to We monitor and log our network and systems significant portion of our worldwide information client loss. and keep raising our people’s security awareness technology and operations functions. A failure to through our WPP Safer Data training and mock provide these functions could have an adverse Nearly 95% of the Group’s people are working phishing attacks. Heightened focus on monitoring effect on our business. During the transformation, remotely as a consequence of the Covid-19 our network and systems and raising awareness of we are still reliant on legacy systems which could pandemic which has the potential to increase the potential for phishing and other cyber-attacks restrict our ability to change rapidly. the risk of compromised data security and during the period of remote working and an cyber-attacks. increased focus on our control environment. A cyber-attack could result in disruption to one or more of our businesses or the security of data being compromised.

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HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES FINANCIAL RISKS

CREDIT RISK We are generally paid in arrears for our services. Evaluating and monitoring clients’ ongoing We are subject to credit risk through the default Invoices are typically payable within 30 to 60 days. creditworthiness and in some cases requiring of a client or other counterparty. credit insurance or payments in advance. We commit to media and production purchases on behalf of some of our clients as principal or agent We are working closely with our clients during depending on the client and market circumstances. this period of economic uncertainty to ensure If a client is unable to pay sums due, media and timely payment of services in line with contractual production companies may look to us to pay those commitments and with vendors to maintain the amounts and there could be an adverse effect on settlement flow on media. our working capital and operating cash flow. Our treasury position and compliance with A significant number of our clients and suppliers lending covenants is a recurring agenda item for are adversely financially impacted by the Covid-19 the Audit Committee and Board. pandemic and economic inactivity across markets in periods of lockdown. Clients may seek to Increased management processes to manage renegotiate payment terms, ask for discounts or fail working capital and review cash outflows and to honour their payment obligations which would receipts during the Covid-19 pandemic. have an adverse impact on our working capital and operating cash flow.

INTERNAL CONTROLS Failure to ensure that our businesses have robust Transparency and contract compliance are Our performance could be adversely impacted control environments, or that the services we embedded through the networks and reinforced if we failed to ensure adequate internal control provide and trading activities within the Group by audits at a WPP and network level. procedures are in place. are compliant with client obligations, could adversely impact client relationships and business Regular monitoring of key performance indicators volumes and revenues. for trading are undertaken to identify trends and issues. An authorisation matrix on inventory trading is agreed with the Company and the Audit Committee.

A new controls function has been established in 2020 to review and enhance controls across the Group. We have issued renewed guidance to our businesses of the need to focus on controls through the period of remote working as a consequence of the Covid-19 pandemic.

KEY

Increased risk

No change from last year

Reduced risk New risk in 2019

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HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES COMPLIANCE RISKS

DATA PRIVACY We may be subject to investigative or We develop principles on privacy and data We are subject to strict data protection and enforcement action or legal claims or incur fines, protection and compliance with local laws. privacy legislation in the jurisdictions in which damages, or costs and client loss if we fail to We implemented extensive training ahead of we operate and rely extensively on information adequately protect data or observe privacy GDPR implementation in 2018 and the roll out of technology systems. We store, transmit and rely legislation in every instance. A system breakdown a GDPR toolkit to assist our people to prepare on critical and sensitive data such as strategic or intrusion could have a material adverse effect for implementation and will do the same as new plans, personally identifiable information and on our business, revenues, results of operations, legislation is adopted in other markets. trade secrets. Security of this type of data is financial condition or prospects. exposed to escalating external threats that are A Chief Privacy Officer and Data Protection increasing in sophistication, as well as internal Governments and public health officials have Officer have been appointed at the Company and data breaches. mandated precautions to mitigate the spread Data Protection Officers are in place at a number of Covid-19 including lock-downs and remote of our companies. Existing and new data protection laws, GDPR working. Nearly 95% of our people are working and the CPPA and legislation in the markets in remotely which has the potential to increase Our people must take Privacy & Data Security which we operate concerning user privacy, use the risk of compromised data security. Awareness training and understand the WPP Data of personal information, consent and online Code of Conduct and WPP policies on data tracking may restrict some of our activities and privacy and security. increase costs. Privacy regulators have continued to underline the obligation on businesses to The Data Health Checker survey is performed ensure continued compliance with data privacy annually to understand the scale and breadth legislation during the Covid-19 pandemic. of data we collect so the level of risk associated with this can be assessed.

We have issued renewed guidance to our businesses of the need to focus on controls and privacy legislation through the period of remote working as a consequence of the Covid-19 pandemic.

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HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES

TAXATION Changes in local or international tax rules, for We actively monitor any proposed regulatory or We may be subject to regulations restricting our example, as a consequence of the financial statutory changes and consult with government activities or effecting changes in taxation. support programmes being implemented by agencies and regulatory bodies where possible governments during the Covid-19 crisis, changes on such proposed changes. arising from the application of existing rules, or challenges by tax or competition authorities, for Annual briefings to the Audit Committee of example, the European Commission’s State Aid significant changes in tax laws and their application decision into the Group Financing Exemption in and regular briefings to executive management. the UK CFC rules, may expose us to significant We engage advisors and legal counsel to obtain additional tax liabilities or impact the carrying opinions on tax legislation and principles. value of our deferred tax assets, which would affect the future tax charge.

REGULATORY We operate in a number of markets where the Online and in-country ethics, anti-bribery, We are subject to strict anti-corruption, corruption risk has been identified as high by corruption and anti-trust training on a Group-wide anti-bribery and anti-trust legislation and groups such as Transparency International. Failure basis to raise awareness and seek compliance with enforcement in the countries in which to comply or to create a culture opposed to our Code of Conduct and the Anti-Bribery & we operate. corruption or failing to instil business practices Corruption Policy. that prevent corruption could expose us to civil and criminal sanctions. Formation of our internal business integrity function to ensure compliance with our codes and policies and remediation of any breaches of policy.

Renewed communication of the Right to Speak confidential, independently operated helpline for our people and stakeholders to raise any potential breaches of our Code and policies, which are investigated and reported to the Audit Committee on a regular basis.

Due diligence on acquisitions and on selecting and appointing suppliers and restrictions on the use of third-party consultants in connection with any client pitches. Rolling programme of creating shared financial services in the markets in which we operate and the creation of a new controls function in 2020.

The establishment during 2019 of Risk Committees at WPP and across the networks to monitor risk and compliance through all of our businesses and the enhancement of our business integrity programme across our markets.

Gift and hospitality register and approvals process.

SANCTIONS Failure to comply with these laws could expose Online training to raise awareness and seek We are subject to the laws of the US, the us to civil and criminal penalties including fines compliance and updates to our companies EU and other jurisdictions that impose and the imposition of economic sanctions against on any new sanctions. sanctions and regulate the supply of us and reputational damage and withdrawal of services to certain countries. banking facilities which could materially impact Regular briefings to the Audit Committee and our results. constant monitoring by the WPP legal team with assistance from external advisors of the sanctions regimes.

90 WPP ANNUAL REPORT 2019 ASSESSING AND MANAGING OUR RISKS STRATEGIC REPORT

HOW IT IS MANAGED AND REFLECTED PRINCIPAL RISK POTENTIAL IMPACT IN OUR STRATEGIC PRIORITIES EMERGING RISKS

Increased frequency of extreme weather This includes storms, flooding, wildfires and water Our strategy of co-locating our people in WPP and climate-related natural disasters. and heat stress which can damage our buildings, Campuses is enabling us to centralise emergency jeopardise the safety of our people and significantly preparedness procedures. It will also enable us disrupt our operations. At present 9% of our to more efficiently deploy climate mitigation headcount are located in countries at “extreme” measures. We intend to further explore the risk from the physical impacts of climate change exposure of our assets to the physical impacts in the next 30 years. of climate change using the IPCC’s RCPs utilising a 2c scenario analysis.

Increased reputational risk associated with As consumer consciousness around climate Our climate crisis training will ensure that our working on environmentally detrimental change rises, our sector is seeing increased people recognise the importance of our sector’s client briefs. scrutiny for our role in contributing to consumption. role in addressing the climate crisis. It will be part Our clients seek expert partners who can give of a broader sustainability training programme recommendations that take into account which we will run in multiple markets with stakeholder concerns around climate change. localised content in key regions.

Additionally, WPP serves some clients whose We are also developing internal tools to help our business models are under increased scrutiny. people identify environmentally harmful briefs. This creates both a reputational and related These tools will embed climate-related issues financial risk for WPP if we are not rigorous in within existing content-review procedures across our content standards as we grow our the organisation. sustainability-related services.

KEY

Increased risk

No change from last year

Reduced risk New risk in 2019

WPP ANNUAL REPORT 2019 91 CORPORATE GOVERNANCE

92 WPP ANNUAL REPORT 2019

CORPORATE GOVERNANCE

Chairman’s letter 94

Our Board 96

Our Executive Committee 98

Corporate governance report 100

Sustainability Committee report 107

Nomination and Governance Committee report 108

Audit Committee report 109

Compliance with the Code 112

Compensation Committee report 114

WPP ANNUAL REPORT 2019 93 CORPORATE GOVERNANCE

CHAIRMAN’S LETTER

This 2019 Annual Report by definition deals primarily with events that took place before the coronavirus outbreak.

As we look back at 2019, the consistent theme was the Company's delivery against its stated goals and the progress of the three-year transformation plan.

In the first year of the new strategy, WPP met the financial guidance it set at the Investor Day in December 2018, achieved its restructuring targets and – with a more streamlined portfolio and refreshed offer to clients – made sure it was in the right shape for the future.

The Company’s renewed focus on creativity, technology and talent was rewarded with a steady stream of new business wins, followed by Intel at the start of this year, as clients responded positively to WPP’s new offer and approach.

Notable events included the successful The terrible human cost and economic impact completion of the Kantar transaction – ahead REMEMBERING GORDON STEVENS of the coronavirus pandemic means we are of schedule – which reduced WPP’s leverage Gordon Stevens, Chairman of WPP 1992-96, looking at everything through a new lens. to the lower end of the target range. Net died on 10 September 2019, aged 93. debt at the year-end was £1.540 billion, As our Chief Executive’s opening statement down £2.313 billion from the beginning of Mr Stevens, as a young director of a in this report makes clear, our people have the year in constant currency as a result Unilever subsidiary, commissioned, in responded magnificently to the crisis, of disposals and strong cash generation. 1955, the first-ever television commercial displaying great resilience, dedication and aired in the UK. Many years later, having concern for their colleagues. On behalf of In these uncertain times, we find considerable been Director of Marketing for the the Board, I would like to thank them all. reassurance in the strength of our balance Unilever Group, he was Chairman of sheet following the Kantar sale, and the Unilever United States in which role he WPP and its agencies have done what they underlying strength of our business following gave his crucial support to WPP’s can to help fight the spread of the disease and the restructuring of the last 18 months or so. acquisition of J. Walter Thompson. support national and international institutions, including working on a pro bono basis with Since my appointment as Chairman, we After retiring from Unilever, Mr Stevens the World Health Organization to deliver have proactively reviewed the Board’s was offered the chairmanship of WPP campaigns around the world. non-executive membership to ensure that it when it was facing a major restructuring has the expertise, diversity and experience after a significant fall in its share price. Mr We have also taken a number of steps to required to support the transformation and Stevens accepted the challenge, against secure the position of the Company, and success of WPP. the recommendation of many of his minimise the financial effects of the pandemic friends and former colleagues, and helped on our people, including suspending the share In the last year we have made several new to persuade the institutional shareholders buyback programme and final dividend, appointments and at our 2020 Annual to back the Company. By the time of his reducing costs and introducing a voluntary General Meeting we will say farewell to retirement, aged 70, WPP’s share price salary sacrifice scheme for the Board, a number of long-serving directors. had increased over five-fold. Executive Committee and other senior leaders. Sol Trujillo has served on the Board for He was a man of exceptional experience: The Board and executive team is working nine years and will not be standing for deceptively shrewd and boundlessly hard to serve the interests of all our re-election. His international experience good-natured. We remember Mr Stevens stakeholders, and constantly reviewing the gained over three decades as chief executive with respect, gratitude, and much affection. actions necessary to ensure the continued of global companies has been of great value strength of the Company. to WPP, as have his contributions as a member of the Audit Committee.

94 WPP ANNUAL REPORT 2019 CHAIRMAN’S LETTER CORPORATE GOVERNANCE

Sir John Hood has brought his knowledge and of J Sainsbury plc from 2010 to 2016, Keith is co-Chair of our new Sustainability experience of international business and higher responsible for business strategy, new Committee with Sally Susman. education to the Board since 2014. As Chair business development, Sainsbury’s Online, of the Compensation Committee Sir John has operational efficiency and Sainsbury’s The establishment of our first committee overseen a comprehensive re-evaluation of the Bank, in addition to core finance functions. dedicated to sustainability at Board level Directors’ Compensation Policy alongside underlines the fact that it has never been more extensive consultation with shareholders. Our new Non-Executive Directors bring important to our business – or to our clients, He will also stand down at the AGM. valuable new skills to the Board, in addition shareholders and stakeholders as a whole. to those we need to replace as other Since Daniela Riccardi, CEO of international directors conclude their terms. The new committee will consider the impact luxury goods company Baccarat, joined the of WPP’s own operations and our agencies’ Board in 2013, WPP has benefited from her The most recent appointee, Sandrine work for clients, and assess the Company’s wealth of expertise in global FMCG, retail and Dufour, provides important sectoral insight progress against the new targets set out in fashion businesses. She has been a valued and expertise from her background in the 2019 Sustainability Report. WPP starts member of the Nomination and Governance telecommunications, entertainment and from a strong foundation, as a recognised Committee and one of our Non-Executive media. Sandrine, who joined the Board in leader in its sector. Our CEO outlines our Directors responsible for engagement with our February 2020, will become Executive performance over the last year in the people. She, too, will not stand for re-election. Vice President and Chief Financial Officer introduction to this Annual Report. of UCB, the global biopharmaceutical We thank Sol, Sir John and Daniela for their company, on 1 July 2020. Until then she is WPP’s new leadership team has placed service and contribution to WPP. Chief Financial Officer of Proximus, the a strong emphasis on the importance of Belgian telecommunications company. Prior purpose and a positive and values-led We also say goodbye to two other to that she held various senior roles at Vivendi. culture. Part of that is a commitment to longstanding colleagues. Sandrine has joined our Audit Committee. ensure inclusive and diverse teams throughout the business, and the Board Paul Richardson’s retirement from WPP was During 2019, we were joined by Cindy Rose needs to set the standard in that regard. announced towards the end of 2018. He OBE, CEO of Microsoft UK where she has kindly agreed to stay on until the publication responsibility for all of the company’s I am pleased to report that the proportion of this Annual Report, and to facilitate the product, service and support offerings. of female directors has risen from 33% at the handover to his successor as Chief Financial Cindy is one of the technology industry’s time of my last letter to 40% as I write this. Officer, John Rogers. leading figures, with extensive experience of Our ambition is that the figure will reach consumer businesses and technology-driven parity in the short term. Paul has made a very significant contribution transformation. Cindy has held leadership to WPP’s success over nearly three decades roles at Vodafone, Virgin Media and The Walt This is an important sign of our priorities as a with the Company, and he leaves with our Disney Company. She is also a member of our company and our direction of travel, even as best wishes and thanks. Audit Committee. there remains work to do to create a more equal organisation at every level. Our Company Secretary, Marie Capes, who Jasmine Whitbread began her career in has been with WPP since its earliest days, international marketing in the technology Any business that wants to be an employer of decided in 2019 that she would step down sector before taking leadership roles at choice for outstanding people needs to display from her current roles in 2020. The hallmark Oxfam and Save the Children, where she leadership and progress in these areas, and of her 34 years with WPP has been her revitalised one of the UK’s most established outstanding people are the reason clients complete dedication to the Company, and charities before taking on the role of continue to seek out and value our services. both the Board and the executive team International CEO. She is currently Chief would like to express their gratitude for Executive of London First and a Non- As ever, the Board is very grateful for their everything she has done. Executive Director of Standard Chartered commitment and their talent. What they do plc. Jasmine joined our Compensation and will be in high demand as societies and Marie hands over to new Company Secretary Sustainability Committees. economies recover from the present crisis. Balbir Kelly-Bisla, who joined us in April from William Hill plc where she held the same role. Keith Weed, one of the world’s most influential and respected marketers, brings We welcomed John Rogers to the Board in deep understanding of our business and how February. He was previously Chief Executive it is being changed by technology. His most Officer of Sainsbury’s Argos, where he led recent executive role was Chief Marketing the digital transformation of one of the and Communications Officer of Unilever, Roberto Quarta UK’s leading technology-driven businesses. which included leading the company’s Chairman Before that he was Chief Financial Officer ground-breaking sustainability programme. 29 April 2020

WPP ANNUAL REPORT 2019 95 CORPORATE GOVERNANCE

OUR BOARD

CHANGES TO THE BOARD ROBERTO QUARTA MARK READ PAUL RICHARDSON DURING THE YEAR: CHAIRMAN CHIEF EXECUTIVE OFFICER GROUP FINANCE DIRECTOR Ruigang Li – retired from the Appointed: 1 January 2015 Appointed: 3 September 2018 Appointed: 1996 Board on 12 June 2019 (Chairman 9 June 2015) Nationality: British Nationality: British and American Italian and American Cindy Rose OBE – appointed to Nationality: the Board on 1 April 2019 Roberto has extensive and diverse Mark has held multiple leadership Paul became Group Finance Director of experience in corporate governance positions at WPP, having first joined WPP in 1996 after four years as Director Jasmine Whitbread – appointed to the Board on 1 September 2019 and global commerce. the Company in 1989. As Head of of Treasury. He is Partner and Chairman of Clayton, Strategy and then CEO of WPP Digital Paul is responsible for the Company’s Keith Weed – appointed to the he was responsible for WPP’s first Board on 1 November 2019 Dubilier & Rice Europe, a private equity worldwide functions in finance, firm, which allows him to bring valuable moves into technology. information technology, procurement, perspective to WPP, particularly when Earlier in his career, he co-founded property, treasury, taxation, internal COMMITTEE evaluating acquisitions and new internet start-up WebRewards and audit and sustainability. Paul is a MEMBERSHIP KEY business opportunities. specialised in media and marketing chartered accountant and fellow of the Audit Roberto has an in-depth understanding as a principal at consultancy Booz Association of Corporate Treasurers. Compensation of differing global governance Allen & Hamilton. Paul will retire from the Board on Nomination and Governance requirements having served on the In 2015, he became Global CEO of 1 May 2020. Sustainability boards of a number of UK and Wunderman, which he transformed into Other current appointments: Committee Chairman international companies, including as one of the world’s leading creative, None. For full biographical details of Chairman of BBA Group plc, IMI plc and data and technology agencies. our Board members, please see Rexel SA and as Non-Executive Director Mark is regularly named among the wpp.com/about/our-leadership of BAE Systems plc, Equant NV and world’s top digital influencers. He is the Foster Wheeler AG. Chairman of the Natural History Museum Other current appointments: Digital Council and was recognised as a Chairman, Smith & Nephew plc. HERoes Champion of Women in Business in 2018 and 2019. Other current appointments: None.

NICOLE SELIGMAN JACQUES AIGRAIN TAREK FARAHAT SIR JOHN HOOD SENIOR INDEPENDENT DIRECTOR, NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Appointed: 13 May 2013 Appointed: 11 October 2016 Appointed: 1 January 2014 Appointed: 1 January 2014 Nationality: Swiss and French Nationality: Brazilian and Egyptian Nationality: New Zealander Nationality: American Nicole is a global business leader and Jacques brings business, corporate Tarek has extensive leadership and Sir John brings deep knowledge and an internationally recognised lawyer. finance and governance expertise to his brand-building experience gained in experience of international business She brings to the Board analytical role on the Board of WPP. leading businesses in the Americas, to the Board, and provides analytical skills, in-depth knowledge of public Currently a Senior Advisor at Warburg Europe, Middle East and Africa. rigour arising from his leadership roles company corporate governance and a Pincus LLP, from 2001 to 2009 he was a He worked for Procter & Gamble for in higher education and research. comprehensive understanding of media member of the Executive Committee of over 26 years in Europe, the Middle East He has held advisory roles for the and business issues. Swiss Re AG. Prior to Swiss Re, he spent and Latin America, leading multi-billion- New Zealand and British governments Nicole was previously President of Sony 20 years with JPMorgan Chase. dollar businesses for the company. His and has served as a Non-Executive Entertainment, Inc. and global General Jacques was previously Chairman of last position at Procter & Gamble was Director of British and New Zealand- Counsel for Sony Corporation. Prior to LCH Clearnet Group Ltd, a Director of President of Procter & Gamble Latin based enterprises. that, as a partner at law firm Williams & the Qatar Financial Center Authorities America and member of the Global He was formerly Vice Chancellor of the Connolly, Nicole represented key public and a Supervisory Board Member of Leadership Council. University of Oxford and the University figures and major media and other Lufthansa AG and Swiss International Tarek was previously Chairman of of Auckland. companies in complex litigation. Airlines AG. the board of JBS S.A. and a board Other current appointments: Other current appointments: Other current appointments: member of Pilgrims Pride Corporation President and CEO, Robertson Non-Executive Director, ViacomCBS Inc. Chairman, LyondellBasell NV. and Alpargatas. Tarek is currently a Foundation. Non-Executive Director, Non-Executive Director, Far Point Non-Executive Director, strategic advisor, consultant and Aurora Energy Research. Non-Executive Acquisition Corporation. Non-Executive London Stock Exchange Group plc. partner for companies in the consumer Director, The Blackstone Group Inc. Director, MeiraGTx Holdings plc. Chairman, Singular SAU. goods and healthcare sectors. Other current appointments: None.

96 WPP ANNUAL REPORT 2019 OUR BOARD CORPORATE GOVERNANCE

DANIELA RICCARDI CINDY ROSE OBE SALLY SUSMAN SOLOMON D. (SOL) TRUJILLO NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Appointed: 12 September 2013 Appointed: 1 April 2019 Appointed: 13 May 2013 Appointed: 12 October 2010 Nationality: Italian Nationality: British and American Nationality: American Nationality: American

A senior FMCG, retail and fashion A high-profile leader in the technology Sally brings expertise in An international business executive products executive, Daniela is a and media sectors, Cindy has a deep communications, public affairs, with three decades of leading high-cap recognised leader in business understanding of the role of technology governance and strategy to the Board. global companies in the United States, development and branding. She is in business transformation. She is Executive Vice President, Chief Europe and Asia Pacific, Sol has wide currently CEO of Baccarat, the As Microsoft UK CEO since 2016, she Corporate Affairs Officer for Pfizer, board and corporate governance international luxury goods company, and is responsible for Microsoft’s product, the world’s largest biopharmaceutical experience in the technology, media was previously CEO of Diesel Group. service and support offerings across company. She also heads Pfizer’s and digital sectors. Daniela has substantial global business the UK. Prior to Microsoft, she was corporate responsibility group Sol has managed operations in over experience, having spent 25 years at Managing Director of the UK Consumer and plays a key role in shaping 25 countries from Europe and North Procter & Gamble in senior management division at Vodafone where she led the policy initiatives. America to China, Australasia, Africa and roles around the world – including expansion of its retail store estate from Before joining Pfizer in 2007, Sally was the Middle East. Vice President of Procter & Gamble 350 to over 500 stores. EVP of Global Communications at Estée He is a Senior Advisor to Bain & Colombia, Mexico and Venezuela, Before Vodafone, Cindy was Executive Lauder, where she directed global Company and Chairman of Trujillo Vice President and General Manager Director of Digital Entertainment at corporate affairs strategy and served as Group LLC, which manages investments of Procter & Gamble Eastern Europe & Virgin Media. She also spent 15 years at a member of the Executive Committee. and examines emerging trends in the Russia and President of Procter & The Walt Disney Company, ultimately Sally previously held several senior broader digital space. Gamble Greater China. as SVP & Managing Director of Disney corporate affairs posts at American Other current appointments: Other current appointments: Interactive Media Group. Express, in both London and the Director, Western Union. Chairman, CEO, Baccarat. Non‑Executive Director, Other current appointments: United States. Silk Road Telecommunications. Kering. Non-Executive Director, None. Other current appointments: Comité Colbert. Co-Chair, International Rescue Committee.

DIRECTOR APPOINTMENTS SINCE YEAR-END

KEITH WEED JASMINE WHITBREAD SANDRINE DUFOUR JOHN ROGERS NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER DESIGNATE Appointed: 1 November 2019 Appointed: 1 September 2019 Appointed: 3 February 2020 Appointed: 3 February 2020 Nationality: British Nationality: British and Swiss Nationality: French Nationality: British

Keith has a deep understanding of Jasmine’s experience spans marketing, Sandrine brings deep financial expertise John became Chief Financial Officer WPP’s business, the ways in which technology, finance, media, gained in global companies and strong Designate of WPP in February 2020, technology is transforming marketing telecommunications and not-for-profit strategic capability to the Board. joining from J Sainsbury plc where he was and the sectors in which WPP operates. organisations. Jasmine brings this breadth Sandrine has executive leadership Chief Executive Officer of Argos, leading Keith was named the World’s Most of perspective and knowledge of many experience in the telecommunications, its integration into the Sainsbury’s Influential Chief Marketing Officer by of WPP’s client sectors to the Board. entertainment and media industries and business and its digital transformation into Forbes in 2017, 2018 and 2019, and Global Jasmine is currently Chief Executive of an enthusiasm for cultural, technological one of the UK’s leading online retailers. Marketer of the Year 2017 by the World London First. Between 2005 and 2015, and business transformation. He was previously the Chief Financial Federation of Advertisers. He received Jasmine worked for Save the Children, Sandrine is currently Chief Financial Officer of J Sainsbury plc, responsible The Drum’s Lifetime Achievement from 2010, as International Chief Officer of Proximus. Prior to Proximus, for its business strategy, new business Award in 2018 and was inducted into Executive Officer. In this role, Jasmine Sandrine held a number of leadership development, Sainsbury’s Online and the Marketing Hall of Fame in 2019. From led the merger of 14 separate roles at Vivendi, in France and in the Sainsbury’s Bank, in addition to its core 2010 to 2019, Keith was Chief Marketing organisations into one management line United States, across its entertainment finance functions. and Communications Officer at Unilever, of 15,000 people across seven regions and telecommunications business, John is a member of The Prince’s a role that included creating and and 60 countries. Jasmine began her covering areas including finance and Advisory Council for Accounting for leading Unilever’s ground-breaking career in international marketing in the strategy, M&A, innovation and Sustainability. He also recently sat on sustainability programme. technology sector. Jasmine has transformation. Sandrine has held the Retail Sector Council, which acts as Other current appointments: previously served as a Non-Executive non-executive director roles, most a point of liaison between the UK Board member, Business in the Director of BT Group plc. recently at Solocal Group. Sandrine will Government and retail sector. become CFO of UCB on 1 July 2020. Community. Board member, Grange Other current appointments: Other current appointments: Park Opera. President, the UK Non-Executive Director, Standard Other current appointments: Non-Executive Director, Advertising Association. Chartered plc. None. Travis Perkins plc.

WPP ANNUAL REPORT 2019 97 CORPORATE GOVERNANCE

OUR EXECUTIVE COMMITTEE

The Executive Committee of WPP is responsible for leading the Company and executing its strategy. Its members lead WPP’s largest operating companies and central corporate functions.

MARK READ JOHN ROGERS AJAZ AHMED STEPHEN ALLAN CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER DESIGNATE CHIEF EXECUTIVE OFFICER, AKQA WORLDWIDE CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MEDIACOM Biography can be found on page 96. Biography can be found on page 97. Ajaz is the founder and CEO of AKQA, Stephen became Worldwide CEO and which became part of WPP in 2012. Chairman of MediaCom in 2008. Under Recognised as a creative pioneer, his leadership the agency has grown into AKQA has won over 50 Agency of the one of the world’s top media networks. Year awards.

JACQUI CANNEY JON COOK MEL EDWARDS NICK EMERY CHIEF PEOPLE OFFICER GLOBAL CHIEF EXECUTIVE OFFICER, GLOBAL CHIEF EXECUTIVE OFFICER, GLOBAL CHIEF EXECUTIVE OFFICER, VMLY&R WUNDERMAN THOMPSON MINDSHARE Jacqui joined WPP in 2019 from Walmart, Jon has led VMLY&R since its formation Mel was appointed as CEO of the newly Nick co-founded Mindshare in 1997. where she served as Chief People in 2018 as WPP’s new global brand and formed Wunderman Thompson in 2018, The agency is the current Cannes Lions Officer, having previously worked at customer experience agency. He was having previously been the Global CEO Media Network of the Year and number Accenture. She is responsible for all formerly Global CEO of VML, which he of Wunderman. She joined Wunderman one agency network in the WARC elements of WPP’s people strategy. joined in 1996. as UK CEO in 2012. Media 100.

LAURENT EZEKIEL RICHARD GLASSON ANDREA HARRIS MICHAEL HOUSTON CHIEF MARKETING GLOBAL CHIEF EXECUTIVE OFFICER, GROUP CHIEF COUNSEL AND GLOBAL CHIEF EXECUTIVE OFFICER, & GROWTH OFFICER HOGARTH HEAD OF SUSTAINABILITY GREY Laurent became WPP’s first Chief Richard became CEO of Hogarth Andrea was appointed as Group Chief Grey is among the industry’s Marketing & Growth Officer in 2019. Worldwide in 2016, having joined Counsel in 2005 having joined WPP most-awarded creative agencies. He joined from Publicis where he was the marketing implementation in 1996. In 2017 she also became the Michael became CEO of Grey President of Digitas, North America & agency in 2011. His prior role was Company’s Head of Sustainability. Group in 2017, after roles including International and Client Leader for GSK. CEO of Gyro International, the B2B Global President and CEO of Grey marketing specialist. North America.

98 WPP ANNUAL REPORT 2019 OUR EXECUTIVE COMMITTEE CORPORATE GOVERNANCE

DONNA IMPERATO TOBY JENNER CHRISTIAN JUHL LINDSAY PATTISON GLOBAL CHIEF EXECUTIVE OFFICER, GLOBAL CHIEF EXECUTIVE OFFICER, GLOBAL CHIEF EXECUTIVE OFFICER, CHIEF CLIENT OFFICER BCW (BURSON COHN & WOLFE) WAVEMAKER GROUPM Appointed CEO of the newly formed Toby was named CEO of global media GroupM is the world’s largest media Lindsay became Chief Client Officer Burson Cohn & Wolfe in 2018, Donna network Wavemaker in 2019. He was investment group and home to WPP’s of WPP in 2018. Prior roles include was previously CEO of Cohn & Wolfe. previously Worldwide Chief Operating media agencies. Formerly Global CEO Chief Transformation Officer of WPP BCW is one of the world’s largest Officer of MediaCom, where he spent of Essence, Christian was appointed and Global CEO of Maxus, which she full-service communications agencies. 11 years in a range of senior roles. CEO of GroupM in 2019. joined as UK CEO in 2009.

STEPHAN PRETORIUS ANDREW SCOTT JOHN SEIFERT CHIEF TECHNOLOGY OFFICER CHIEF OPERATING OFFICER WORLDWIDE CHIEF EXECUTIVE OFFICER, OGILVY Stephan was appointed as WPP’s first Andrew joined WPP in 1999 as Director John is a 40-year veteran of Ogilvy, CTO in 2018. Before that he was UK of Corporate Development. He held a one of the world’s most celebrated Group CEO and Global CTO of number of other senior roles including agencies. He was appointed Worldwide Wunderman, having joined the Chief Operating Officer for Europe CEO in 2016 after leading the agency’s company in 2016. before being appointed COO in 2018. North American operations.

WPP ANNUAL REPORT 2019 99 CORPORATE GOVERNANCE

CORPORATE GOVERNANCE REPORT

The WPP Board is committed OUR GOVERNANCE STRUCTURE to ensuring there is a strong and effective system of BOARD corporate governance in Report from page 94 place to support the successful execution of the Company’s strategy. NOMINATION & AUDIT GOVERNANCE COMPENSATION SUSTAINABILITY COMMITTEE COMMITTEE COMMITTEE COMMITTEE Report from Report on Report from Report on page 109 page 108 page 114 page 107

DISCLOSURE COMMITTEE

EXECUTIVE COMMITTEE

BOARD ATTENDANCE TABLE: 2019

Nomination and Board Governance Committee

(Scheduled (Unscheduled Audit Compensation (Scheduled (Unscheduled Sustainability meetings) meetings)1 Committee Committee meetings) meetings) Committee2

Roberto Quarta 6/6 4/4 7/7 5/5 1/1 Mark Read 6/6 4/4 Paul Richardson 6/6 4/4 Jacques Aigrain 6/6 4/4 9/9 7/7 Tarek Farahat 6/6 3/4 9/9 Sir John Hood 6/6 4/4 7/7 Daniela Riccardi 6/6 3/4 5/5 0/1 Cindy Rose OBE – appointed on 1 April 2019 4/4 3/4 4/5 Nicole Seligman 6/6 4/4 7/7 5/5 1/1 Sally Susman 6/6 3/4 4/5 1/1 1/1 Solomon D. (Sol) Trujillo 6/6 4/4 8/9 Keith Weed – appointed on 1 November 2019 1/1 1/1 Jasmine Whitbread – appointed on 1 September 2019 2/2 1/1 2/2 1/1 Former Directors who served for part of the year Ruigang Li – retired on 12 June 2019 0/3 0/1 0/3

1 Additional unscheduled meetings of the Board took place in relation to the sale of 60% of Kantar. 2 The Sustainability Committee was established on 12 December 2019.

100 WPP ANNUAL REPORT 2019 CORPORATE GOVERNANCE

COMPOSITION AND DIVERSITY

ENSURING A INDEPENDENCE AND BALANCED BOARD RE-ELECTION TO THE BOARD The composition of the Board and its The independence, effectiveness and Committees is under regular review and commitment of each of the Non-Executive the range of skills and capabilities at Board Directors have been reviewed by the level is assessed for relevance to the Nomination and Governance Committee execution of our transformation and strategy. and as part of the Board evaluation detailed Cultural and gender diversity, expertise in on page 103. We were satisfied with the important markets such as China, and contributions and time commitment of all experience in technology, ecommerce and the Non-Executive Directors during the year. finance are key requirements for future The Committee was confident that each of Non-Executive Directors. the Non-Executive Directors remains independent and will be in a position to DIVERSITY discharge their duties and responsibilities in The Board’s policy on diversity commits the coming year. With the exception of Sol WPP to increasing diversity across the Trujillo, Sir John Hood, Daniela Riccardi and Company and supports the development Paul Richardson who are retiring from the and promotion of all talented individuals. Board and Sandrine Dufour, John Rogers, As at the date of this report, women Keith Weed and Jasmine Whitbread whose comprised 40% of the WPP Board and 50% appointments are being ratified for the of Non-Executive Directors including the first time, all the Directors will stand for Senior Independent Director. re-election at the 2020 AGM with the support of the Board.

OUR BOARD – A DIVERSE MIX OF SKILLS, EXPERIENCE AND KNOWLEDGE*

SKILLS TENURE

13 • 0-3 years / 6 12 12 • 3-6 years / 2 6-9 years / 5 9 • 8 • 9+ years / 2 5

Corporate Finance FMCG Global Private Technology governance media & equity advertising

GEOGRAPHICAL EXPERIENCE GENDER

15 13 13 • Male / 9 • Female / 6 9 9 8

Africa & Asia Europe International Latin North Middle Pacific America America East

* Information as at the date of this report

WPP ANNUAL REPORT 2019 101 CORPORATE GOVERNANCE

SUCCESSION PLANNING

As noted in last year’s Annual Report, during PROCESS OF APPOINTING THE NEW CHIEF FINANCIAL OFFICER late 2018, Paul Richardson, Group Finance SETTING ROLE IDENTIFYING Director, informed the Board that he REQUIREMENTS CANDIDATES PROCESS RECRUITMENT planned to retire. A subcommittee of the Nomination and Governance Committee With input from the Spencer Stuart The subcommittee It was concluded after Board, shareholders, Associates assisted reviewed the shortlist an extensive search oversaw the search for his successor, with clients and senior with the search for and identified a number process that John the assistance of Spencer Stuart Associates. management, a candidates and of candidates for Rogers was the subcommittee of prepared a shortlist interview. Interviews strongest candidate John Rogers, formerly CEO of Sainsbury's the Nomination and of internal and external were conducted by and had the skills and Argos, was appointed to replace Paul Governance Committee candidates most suited members of the experience to support Richardson as a consequence of the search prepared a detailed to the role specification. executive team and the implementation of process. John joined the Board as CFO specification for the the subcommittee, the transformation plan. Designate on 3 February 2020 and will take role of Chief Financial focused on each The Board agreed with over from Paul Richardson as Chief Financial Officer, identifying candidate’s skills and the subcommittee's the skills, knowledge, experience for the role. recommendation. Officer at the beginning of May 2020. experience and attributes required. A key focus of the Nomination and Governance Committee has been on Board refreshment. The outcome of this process resulted in the Committee recommending PROCESS FOR REFRESHING THE NON-EXECUTIVE DIRECTORS ON THE BOARD the appointment of four new Non-Executive SETTING ROLE IDENTIFYING Directors to the Board. The Board agreed REQUIREMENTS CANDIDATES PROCESS RECRUITMENT with the Committee’s recommendations The Nomination and Russell Reynolds The Nomination and The Committee identified and Cindy Rose, Keith Weed, Jasmine Governance Committee undertook an extensive Governance Committee a number of candidates Whitbread and Sandrine Dufour were prepared detailed search process to met frequently and through 2019 who would appointed to the Board. specifications for the identify potential extensively discussed bring new skills to the skills, knowledge, candidates in the the merits of the Board, refresh the experience and external market. candidates and Committees and provide attributes required interviewed those with succession plans for the for new Non-Executive the most potential. Chairs of Committee For further details on the succession planning Directors to join and candidates for the subcommittee and Non-Executive Director the Board. new Sustainability succession planning, see our Nomination and Committee. Governance Committee report on page 108.

INDUCTION AND TRAINING

INDUCTION FOR NEW PROFESSIONAL DEVELOPMENT BOARD INDUCTION NON-EXECUTIVE DIRECTORS AND DIRECTOR TRAINING On completion of the induction programme, The new Non-Executive Directors In 2019, in addition to the regular all new Directors should have sufficient received tailored induction programmes presentations from the management teams knowledge and understanding of the relevant to their roles on the Board and of our businesses on developments in our business to enable them to effectively Committees they joined. These induction sector and use of technology, the Board contribute to strategic discussions and programmes included meetings with senior received bespoke training sessions on the oversight of the operations and the work management and members of the Executive corporate governance rules in the UK and of the Committees they are joining. Committee, access to historical minutes the United States, with a specific focus on and Board materials, visits to some of our independence and managing conflicts businesses and meetings with external of interest. advisors including the Auditors and Company brokers.

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BOARD PERFORMANCE EVALUATION

2018 BOARD EVALUATION PROCESS KEY RECOMMENDATIONS FOR 2019 PROGRESS DURING 2019 During 2018 the Board performance evaluation was externally facilitated by Dr BOARD COMPOSITION BOARD COMPOSITION The Board’s contribution is dependent on its Four new Non-Executive Directors have been Long of Boardroom Review Limited, who has ability to add strategic relevance, diversity of appointed to the Board and John Rogers has no other connection with the Company or perspective and governance expertise. The joined the Board as CFO Designate. individual directors. Dr Long identified three Board should constantly evolve its skills mix. key recommendations for 2019. Progress against each recommendation has been SUPPORTING THE TRANSFORMATION SUPPORTING THE TRANSFORMATION assessed as part of our internal Board Continuous level of domain knowledge and The changes made to the Board and effectiveness review. visibility of the changing landscape. Committee composition in 2019 have enhanced domain knowledge.

CONTINUED FOCUS CONTINUED FOCUS ON THE RISK FRAMEWORK ON THE RISK FRAMEWORK The transformation will demand continued The focus and enhancements being made to focus on risk, enterprise resilience and the the risk framework are set out on pages 80-83. global compliance framework from the Board and its Committees.

2019 BOARD EVALUATION PROCESS KEY AREAS OF FOCUS OUTCOMES The Board performance evaluation in 2019 The Board has effective leadership in place, was internally facilitated by Nicole Seligman, with strong support for and relationships Senior Independent Director. The 2019 between the Chairman, CEO, the Senior review comprised a questionnaire Independent Director and Committee Chairs. completed by each director which drew The Board has been going through a process CULTURE on the recommendations of Dr Long in of refreshment, focusing on succession 2018 and the issues dealt with by the Board for the CFO, and membership of the and Committees throughout the year. The Committees including the formation of the questionnaire was reviewed with Dr Long. ENGAGEMENT new Sustainability Committee, and is very WITH STRATEGY much engaged with the strategic process Nicole Seligman then conducted individual and transformation plan. There is continued discussions with each Board member and focus on business integrity, culture, discussed the performance of the Chairman sustainability, cyber security, data privacy and the Chairs of the respective Committees. SUSTAINABILITY and the risk and control framework. The outcome of the questionnaire and the discussions were shared with the Chairman and the findings were also discussed by the KEY RECOMMENDATIONS FOR 2020 full Board in March 2020. INDUCTION AND DEVELOPMENT TRANSFORMATION AND SIMPLIFICATION The key areas of focus and recommendations Continued focus on domain knowledge for the for 2020 are as set out opposite. Board and new members, understanding the SHAREHOLDER evolving landscape and process of AND STAKEHOLDER transformation. EVALUATION OF THE CHAIRMAN COMMUNICATION The performance evaluation found that FOCUS ON THE RISK FRAMEWORK following the CFO succession process, Continued focus on risk and risk appetite, the Chairman continues to transition the RISK MANAGEMENT enterprise resilience, business integrity and Board through a period of change and AND INTERNAL culture and the controls framework from the transformation and has developed a CONTROL Board and its Committees. supportive relationship with the new CEO. There are constructive relationships between BOARD MODUS OPERANDI the Chairman, the Senior Independent Ensuring the Board continues to evolve how it Director and the Committee Chairs and in functions and its skills mix and how it engages with stakeholders. collaboration with the CEO, the Chairman is redeveloping the Board’s way of working.

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HOW OUR BOARD ENGAGES

OUR APPROACH TO ENGAGEMENT Decisions of the Board are taken after A CHANGING STAKEHOLDER The success of our business is dependent receiving reports from management on ENVIRONMENT upon our ability to understand and respond issues concerning our stakeholders and after As our industry continues to change, so too to the needs of the various stakeholders discussing the impact of that decision on has the way in which we interact with our connected with WPP. When making our employees, clients, partners, investors, stakeholders. The line that separates client, decisions, our Board considers which course governments and regulators where relevant, stakeholder, partner and competitor has of action best leads to the success of the reflecting what are referred to as Section 172 become increasingly blurred, as they are all Company over the long term, which requires duties. These duties derive from UK interconnected. Google is a client, supplier an understanding of how our decisions legislation, which WPP is not subject to and partner, for example. impact these stakeholder groups. being incorporated in Jersey. Nonetheless, as described in this section, WPP’s Board has had regard to the matters described in Section 172.

ENGAGEMENT IN ACTION

KANTAR SALE TOP CONSIDERATIONS The Chairman, CEO, CFO and COO, as well as members of the investor relations team, 1 What is the financial impact of the 4 Will you still get access to Kantar’s data? regularly discussed the rationale for the Kantar transaction? Yes. There is significant overlap between Kantar transaction with investors, as well as F inancial leverage is reduced to the low end Kantar’s customer base and the rest of WPP, of WPP’s target range of 1.5-1.75x average and our agencies will continue to use Kantar the potential allocation of proceeds between net debt/EBITDA for 2020, a year ahead of where appropriate to inform their work debt reduction and a return to shareholders. the target date. The £950m share buyback for clients. In addition, investors were invited to outline programme announced in December 2019 their own preference between a special and suspended in March 2020, as a 5 How did you decide on the split of proceeds dividend and some form of share buyback. consequence of Covid-19, would partially between debt reduction and returning mitigate the impact of the transaction funds to shareholders? Consultations and meetings also took place on headline earnings per share. We were keen to strike a balance between in relation to the transaction with the largest reducing debt to a level which would clients of the Group and with suppliers 2 Why are you reducing your exposure to insulate us from any downturn in the data when some of your competitors are economic cycle, while also giving us impacted by the disposal and with works increasing theirs? flexibility to invest if opportunities arise, councils representing employees of Kantar Kantar is a different type of data business to and limiting the impact of the transaction on in a number of jurisdictions. the assets that our peers have been acquiring, headline earnings per share. We consulted so the value of the comparison is limited. Our widely with shareholders, the significant focus is on combining multiple relevant data majority of whom have been very supportive sources (for example, our clients’ customer of the split. data, and data from third-party platforms such as Google and Facebook) to help clients run effective campaigns. We don’t need to own data to do this, and ownership of some data is becoming increasingly regulated and complex. 99.99% 3 Why have you retained a 40% stake? The 40% stake allows us to share in any shareholder vote approving future upside in valuation in Kantar, and was sale of 60% of Kantar business also an attractive structure for Bain Capital, at a General Meeting held on who value the ongoing partnership. It also 24 October 2019 provides continuity for our clients.

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OUR ENGAGEMENT DURING 2019 The following table summarises our key stakeholders, as well as the engagement that has been undertaken across the business during the year:

STAKEHOLDER GROUP HOW WE ENGAGED IN 2019

SHAREHOLDERS The presentations remain on our website, together Our 2019 AGM and EGM were both well attended, Engagement with our shareholders is an ongoing with updates on our progress. and all proposed resolutions passed. Each process. In 2019 as we implemented the first year shareholder meeting gave our shareholders the We have held meetings with major shareholders in of our new strategy and the disposal of 60% of opportunity to pose questions directly to the Board. relation to the use of the proceeds of sale of Kantar Kantar, we have engaged with major shareholders We provided live webcasts of our AGM, EGM and and in relation to the Compensation Policy to be and analysts at meetings with our Chairman, investor day which allowed for engagement by all considered by shareholders at the 2020 AGM. Committee Chairs, CEO, COO and our investor shareholders, regardless of location. We have attended meetings with shareholders in relations team, at our investor day, AGM, EGM and major cities in the UK, US and Europe and attended Our investor relations team responded to daily through webcasts and ongoing email exchanges. all the major conferences in our sector. questions from shareholders and analysts and we have listed some of these on page 104.

CLIENTS AND PARTNERS During the year this included client presentations place in our market and understanding the changes Our clients are in many cases also our partners at our Board meetings and client participation in taking place in our clients’ and suppliers’ markets, providing services to our Company and may also events, such as our WPP investor day and strategy our preparations for and impact of the CPPA and be our competitors. We are constantly engaging conference. Our people participated in multiple our SAFER DATA training, the issues raised by Brexit through our Client Team Leaders, our respective events with Adobe, Microsoft, Amazon and Google for our Company and people and the due diligence CEOs, participation in collaborative training, our during the year focused on new products and undertaken on our supply chain, diversity and unconference event Stream, joint sustainability and workflow innovation. inclusion, transparency in our media businesses, pro bono initiatives and on shared policy initiatives brand safety and sustainability initiatives including The issues we engaged with our clients and such as the Business Against Slavery forum. the single‑use plastics initiative. partners on in 2019 included the disposal of 60% of Kantar, our new strategy and the changes taking

GOVERNMENT/NGOs/REGULATORS We are a founding member of the Business Against During the year WPP signed up to the New Plastics We engage with governments, regulators and Slavery Forum in conjunction with the Modern Economy Global Commitment led by UN NGOs to inform the policy frameworks that affect Slavery Unit at the UK Home Office and Environment and the Ellen MacArthur Foundation our Company, clients, investments and competitive participated in the forum throughout the year. (EMF), and is supporting EMF to drive greater environment and support our strategic goals. awareness of the circular economy. For more We work directly with the UN through our information on our work with NGOs, see page 66. Common Ground initiative, partnering with UN For examples of our pro bono work, see pages 6, Women to tackle gender inequality, and with the 67 and 75. UN Framework Convention on Climate Change (UNFCCC) to encourage people from around the We responded to numerous government world to take action on climate change. consultations including, in the UK, the CMA Market Study into Online Platforms.

INDEXES/TRADING ASSOCIATIONS We are members of the IPA in the UK and the We also participated in the Corporate We have representatives on our industry bodies 4A’s in the US and engaged on topics such as Equality Index and the Corporate Political in the markets in which we operate who engaged transparency in media trading and brand safety. Engagement Index. on issues that affect our people, clients and We participated in the Business Disability Forum, competitors. We contributed during the year Business in the Community and the CBI. to indexes that provide meaningful data on governance and policy issues.

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OUR ENGAGEMENT DURING 2019 CONTINUED

STAKEHOLDER GROUP HOW WE ENGAGED IN 2019

PEOPLE We use formal and informal mechanisms to Employee surveys help us assess and act on We depend on the talent, creative abilities and assess and improve employee engagement engagement and satisfaction levels. In 2020, we will technical skills of our people. To attract and and satisfaction. launch our first Company-wide employee survey. retain the best and most forward-thinking talent, People forums are one example, which were The vast majority (95%) of our companies carry out we are focused on embedding our new culture, piloted in 2019 in the UK. The views and ideas exit interviews with leavers, which often provide improving diversity and inclusion and investing in raised through these forums are shared with helpful feedback on our culture and practices. skills and creativity. our Non-Executive Directors responsible Across our operating companies, sustainability for workforce engagement. See below for enthusiasts are creating Green Teams to embed more details. sustainability initiatives in their companies and driving change in their office.

TOP THREE PRIORITIES PEOPLE FORUMS In 2020, we will roll out an India People IDENTIFIED BY EMPLOYEES To ensure our Board understands the views Forum representing employees from of our employees on WPP’s purpose, values Mumbai, Delhi and Bangalore. and strategy, in 2019 we established our first 1 People Forum in the UK. Sponsored by our Sally Susman stepped down from her role Creating cultures where UK Country Manager, the Forum has as one of the Non-Executive Directors all talent can thrive representatives from across our UK business responsible for engaging with the Forum in who gather feedback from their agencies to December 2019 when she became co-Chair feed up to the WPP Board. The Board also of the Sustainability Committee and Cindy 2 consults the Forum on key people issues. Rose has been elected to this role. Flexible working The UK People Forum met three times during the year. In its first meeting, the Forum identified the top priorities for employees, which included "creating cultures where 3 all talent can thrive" (top priority) and Sustainability "sustainability" (third priority). As a direct result of feedback through this Forum, we are piloting a new Sustainability Knowledge Hub to share best practice and foster collaboration on sustainability issues across our agencies. We also launched the single-use plastics initiative (see page 72) and developed resources in collaboration with the Forum.

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SUSTAINABILITY COMMITTEE REPORT

Our newest Committee held its first DEAR SHAREHOLDER At our meeting in December we also meeting on 12 December 2019 The world is changing around us more reviewed the single‑use plastics policy quickly than ever before with significant launched by the Group in 2019, to phase out Committee members: risks and opportunities for our business plastics that cannot be renewed, recycled –– Sally Susman (co-Chair) and for those of our clients. While changes or composted across all the Group’s 3000+ –– Keith Weed (co-Chair) in technology have been rapid and highly offices and Campuses by the end of 2020. –– Jasmine Whitbread impactful and attracted considerable Board In addition to the policy, the Committee Key responsibilities focus, there have also been rapid changes also reviewed the seven-step action plan –– Understanding the sustainability in the area of ESG and sustainability. produced by the Company, a playbook to challenges and opportunities for embed the policy and audit plan to be the Group The WPP Sustainability Committee has been adopted by the Group companies to –– Engaging with stakeholders formed to give increased focus in this area support the policy. –– Assessing the Group’s current for the Board and the Group, to strive to strategy footprint, identifying meet the expectations of our stakeholders The Committee members all bring a great materiality and reviewing (from our clients, investors and people to depth of knowledge and experience in the sustainability targets and commitments NGOs, consumers and society at large), as area of ESG and sustainability and we are well as to ensure we are managing our risks very much looking forward to our new role and taking advantage of the opportunities. for the Company.

We held our first meeting in December 2019 at which we adopted the terms of reference and agreed the scope of work for the Committee for 2020. The Sustainability Committee will first gain an understanding Sally Susman Keith Weed of the breadth of sustainability work already Co-Chairs of the in progress across the business and will then Sustainability Committee identify what is material in forming WPP’s 29 April 2020 sustainability strategy and review the KPIs to help measure effectiveness of delivery. That workstream has already begun with an in-depth review of the workstreams in January 2020. The sustainability section on pages 58-79 sets out the new carbon and renewable targets the Group has set this PACKAGING REINVENTED year, which are net zero carbon emissions in Costa Rica produces 560 tons of our Campuses by 2025 and 100% renewable plastic waste a day. Geometry electricity by 2025, as well as the target, set asked eco-activists to share in 2017, of 0.41 tonnes CO2e per employee photos of products with by 2030. unnecessary layers of plastic on social media and challenged young product designers to create sustainable alternatives that save time, money, and our planet, publishing solutions online for companies to access and implement.

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NOMINATION AND GOVERNANCE COMMITTEE REPORT

Committee members: DEAR SHAREHOLDER who have the skills and experience to align –– Roberto Quarta (Chairman) The focus of the work of the Committee the Board’s composition with the Company’s –– Ruigang Li (retired 12 June 2019) in 2019 has been the recruitment and strategic objectives and transformation plan –– Daniela Riccardi appointment of the Chief Financial Officer, whilst increasing our diversity. –– Nicole Seligman the appointment of four new Non-Executive –– Sally Susman Directors, including a successor as Chair of SUCCESSION PLANNING Highlights the Compensation Committee. In addition to succession planning for Board –– Chief Financial Officer roles, the Committee received presentations appointment BOARD AND COMMITTEE CHANGES from the Chief Executive Officer and Chief –– Appointment of four Non- 2019 was the first full year of transformation People Officer on succession planning for Executive Directors including for the Company and as part of our ongoing senior management to support the a successor to become Chair of succession planning for the Board, a number transformation plan. The Committee the Compensation Committee of changes have taken place during 2019. monitors a schedule on the length of tenure, –– Focus on Board composition skills, experience and diversity of the Board. and succession to support the Three of our long-standing Non-Executive transformation plan –– First reports received from Directors, Sol Trujillo, Sir John Hood and PEOPLE FORUMS and engagement with the Daniela Riccardi, will not stand for re-election The Committee received the minutes of the UK People Forum at the AGM in 2020. Jasmine Whitbread three UK People Forum Meetings during the will succeed Sir John Hood as Chair of the year and Daniela Riccardi attended one of Key responsibilities Compensation Committee following the AGM. the meetings to discuss issues raised and –– Evaluates Board composition engage with the members of the UK People and ensures Board diversity and We established a separate Sustainability Forum on diversity and inclusion and the a balance of skills Committee in December 2019. Sally Susman implementation of the transformation –– Reviews executive succession and Keith Weed were elected as co-Chairs programme across the Group. plans to maintain continuity of skilled resource and Jasmine Whitbread was elected as a –– Oversees matters relating to member of this new Committee, all bringing Sally Susman stepped down from her role corporate governance a great depth of experience in sustainability. as one of the Non-Executive Directors responsible for workforce engagement in COMMITTEE EFFECTIVENESS December 2019 when she became co-Chair The Board performance evaluation this year of the Sustainability Committee and Cindy concluded that the Committee is operating Rose has been elected to this role. NON-EXECUTIVE DIRECTOR effectively and has continued to manage a APPOINTMENT PROCESS significant level of change in the Board to ACTION PLAN ensure an enhanced mix of skills for the For 2020 the Committee plans to continue to Engage with search consultancy Board and its Committees. look to enhance the cultural diversity and skills STEP 1 and provide them with a search balance on the Board and review succession specification DIRECTOR APPOINTMENT PROCESS plans for key roles across the business, as The Committee adopts a formal and well as employee engagement through the transparent process when recruiting Directors establishment of additional People Forums Shortlisting candidates STEP 2 by Committee with due regard to the skills, knowledge and in different markets across the Group. level of experience required including geographic experience and diversity. GOVERNANCE Interview process with The Committee oversees the governance STEP 3 Committee members and EXECUTIVE DIRECTOR agenda on behalf of the Board and received Chief Executive Officer The Committee established a succession updates on corporate governance planning subcommittee comprising me as developments and the sustainability strategy Chairman, Nicole Seligman, Jacques Aigrain during the year and has considered the Recommendation to the Board STEP 4 on the chosen candidate and Sally Susman to assist with the impact of those developments and strategy recruitment of the new Chief Financial on the Company. Officer. Spencer Stuart Associates assisted Appointment terms drafted the Company in the recruitment process STEP 5 and agreed with the and is independent of the Company. selected candidate NON-EXECUTIVE DIRECTORS Russell Reynolds, who are also independent Roberto Quarta of the Company, assisted the Committee Chairman of the Nomination during the search process for new Non- and Governance Committee Executive Directors, to find those candidates 29 April 2020

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AUDIT COMMITTEE REPORT

Committee Members in 2019 DEAR SHAREHOLDER –– reviewing and monitoring the Company’s –– Jacques Aigrain (Chairman) I am pleased to present the Audit Committee risk management framework. Assisting the –– Tarek Farahat report which reviews the Committee’s work Board in carrying out a robust assessment –– Cindy Rose OBE (appointed and focus over the past year. of emerging and principal risks. 1 April 2019) Overseeing the Group’s risk exposure and –– Solomon D. (Sol) Trujillo MEETINGS risk strategy; Highlights in 2019 The Committee held nine meetings during –– reviewing the effectiveness of the external –– Monitored the financial information 2019, which were attended by Deloitte LLP audit process, reviewing and monitoring provided to shareholders on the (the Company’s external auditors, the independence and objectivity of disposal of 60% of Kantar and “Deloitte”), the Company’s Chairman, the Deloitte. Reviewing and approving reviewed the related significant Senior Independent Director, the Group Deloitte’s terms of engagement and financial reporting judgements Finance Director, the Chief Executive Officer, remuneration; –– Monitored the development of the the Chief Operating Officer, the Director of –– monitoring applicable accounting and Group’s risk management framework Internal Audit, the Group Chief Counsel, the legal reporting requirements, including all including the formation of the Group Chief Accountant and the Company relevant regulations of the FCA, the SEC, Company’s business integrity function and the roll out of enterprise Secretary. Individual attendance by the the NYSE and the Jersey Financial Services and network level Risk Committees Committee members during 2019 is set out Commission and the UK Corporate –– Carried out an in-depth review of the in the table on page 100. Governance Code; Group’s internal financial control –– reviewing the Company’s systems and system, with a focus on monitoring The Committee held separate private controls for ethical behaviour, the matters remediation and compliance with meetings with Deloitte, the Director of reported on the Group’s Right to Speak Section 404 of SOX Internal Audit, the Group Chief Counsel, the helpline and the investigations and actions –– Considered the change in the Group’s Chief Executive Officer and the Group undertaken by the Group in response; reported operating segments and Finance Director. The Committee Chairman –– reviewing the Group Treasury policy, monitored compliance with IFRS 8 Operating Segments held pre-meetings with Deloitte and regular focusing on debtors, working capital –– Reviewed the implementation of IFRS meetings with the Company’s Directors of and cash management; 16 Leases from 1 January 2019 Internal Audit, Tax and Treasury and the –– reviewing reports on any material litigation Group Chief Counsel. The Committee or regulatory reviews involving Group Key responsibilities Chairman has an ongoing dialogue with the companies; –– Monitors the integrity of financial Group Finance Director, the Group Chief –– reviewing the Group’s acquisitions information provided to Accountant, the Director of Internal Audit strategy, earn-out payment liabilities and shareholders, including the review and the Director of Tax and reports to the integration processes; and of significant financial reporting Board, as a separate agenda item, on the –– reviewing the Group’s tax position and judgements –– Reviews the integrity, adequacy and activities of the Committee at the following UK tax strategy. effectiveness of the Group’s internal Board meeting. financial controls and the internal FAIR, BALANCED AND control and risk management COMMITTEE RESPONSIBILITIES AND UNDERSTANDABLE systems, including the risk HOW THEY WERE DISCHARGED IN 2019 A subcommittee of the Board including management framework and related The Committee’s responsibilities are set out members of the Committee examined compliance activities in its terms of reference. The Committee’s whether the Annual Report taken as a whole –– Monitors and reviews the key responsibilities are as follows: was fair, balanced and understandable and effectiveness of the Group’s internal provided the information necessary for audit function –– Reviews the effectiveness of the –– monitoring the integrity of the Group’s shareholders to assess the Group’s position, external audit process and reviews financial statements and formal performance, business model and strategy. and monitors the independence and announcements relating to the Company’s The subcommittee received an early final objectivity of the external auditors financial performance, reviewing draft of the Annual Report for review and significant financial reporting judgements comment and verification notes and and disclosures; confirmation from the Disclosure Committee –– monitoring and reviewing the Group’s relating to the composition of the Annual internal financial, operational and Report. The Board subsequently considered compliance controls and internal control the Annual Report as a whole and discussed system. Overseeing the Group’s the Annual Report’s tone, balance and compliance with Section 404 of SOX; language for compliance with these –– reviewing and monitoring the activities standards. The Board’s statement on the and effectiveness of the Group’s internal Annual Report is on page 200. audit function. Reviewing and approving the WPP Internal Audit charter;

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FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL JUDGEMENTS Key accounting judgements made by management were reported to and examined by the Committee and discussed with management and Deloitte. The Committee considered the following significant financial reporting judgements in relation to the financial statements:

AREA OF FOCUS ACTIONS TAKEN/CONCLUSION

Kantar: IFRS 5 Non-current Assets Held for Sale The Committee considered management’s ongoing assessment of the conditions that must be satisfied in and Discontinued Operations order to conclude a disposal group is “held for sale”. The Committee monitored progress of the transaction The judgements made in relation to the during 2019 and management’s continued application of the guidance. The Committee was satisfied with accounting and reporting implications of management’s conclusion as to when the Kantar group classified as "held for sale". The Committee reviewed the Kantar disposal. management’s judgements in relation to the key accounting and disclosure impacts of the transaction.

Kantar: disposal accounting The Committee reviewed the judgements made by management in accounting for the disposal of the The calculations of the loss on disposal of the Kantar group. The Committee considered and discussed the related accounting disclosures with Kantar group. management and Deloitte and concluded that these were appropriate.

IFRS 8 Operating Segments The Committee considered management’s proposed changes to the Group’s reported operating segments The review of the Group’s reported operating and challenged management’s approach and assessment of the criteria under IFRS 8 Operating Segments. segments and compliance with IFRS 8. The Committee received further comprehensive reports from management and from Deloitte. The Committee was satisfied with management’s final recommendations and the outcome of the review.

IFRS 16 Leases The Committee received reports from management concerning the adoption of IFRS 16 from 1 January The review of the Group's implementation of IFRS 16. 2019 and the impact on the financial statements. The Committee reviewed the judgements made by management in the application of IFRS 16 and was satisfied that these were appropriate.

Goodwill impairments The Committee challenged the appropriateness of the assumptions used by management in the Judgements in relation to goodwill goodwill impairment assessment model, with a particular focus on the discount rate and growth impairment testing. assumptions. A material weakness has been identified which management are remediating with oversight from the Committee. Management are changing the approach to determining inputs with respect to the discount rates used in impairment assessments and establishing a review process over inputs and the overall discount rate methodology. The identified material weakness has not resulted in a material misstatement in the year ended 31 December 2019 or in any prior years.

Investments The Committee examined management’s valuations, based on forecasts, recent third-party investment, The valuations of non-controlled investments external transactions and/or other available information such as industry valuation multiples. The and unlisted associates. Committee considered Deloitte’s sample testing of the valuations and agreed that the valuations were appropriate based on the information available to the Group.

Earnout liabilities The Committee considered management’s forecasts and reviewed the testing undertaken by Deloitte. The accuracy of forecasting potential future earnout The Committee was satisfied that liabilities for potential future earnout payments have been accounted payments due under acquisition agreements. for appropriately.

Working capital provisions The Committee received regular briefings on management’s approach in assessing the level of exposure The valuation of year-end provisions in respect of across the Group. The Committee considered Deloitte’s audit procedures in this area. The Committee working capital. concluded that management’s approach was appropriate.

Remuneration The Committee reviewed the assumptions applied by management in relation to judgemental elements Accounting for the judgemental elements of of remuneration, including pensions, bonus accrual, severances and share based payments and agreed remuneration. that these are reasonable.

Taxation The Group Tax Director presented to the Committee in December 2019. The Committee considered The judgements made in respect of tax. management’s assumptions, in particular in relation to the level of central tax provisions, and believes that the level of central tax provisions is reasonable.

Going concern The Committee reviewed the range of scenarios modelled by management given the inherent The going concern assessment and viability uncertainty caused by Covid-19 and the cost mitigation actions available to management including the statement. suspension of the share buybacks and 2019 final dividend. The Committee assessed management’s view that the likelihood of declines of over 35% of revenue less pass-through costs from April 2020 was remote. The Committee has considered and concurs with management’s going concern, viability and forecasting assumptions, as set out on page 84.

Restructuring and transformation costs The Committee reviewed management’s key accounting judgements and procedures relating to Recognition of restructuring and restructuring and transformation costs and the testing carried out by Deloitte. The Committee was satisfied transformation costs. with the quantum of costs recognised in 2019 and the presentation of such costs in the financial statements.

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EXTERNAL AUDIT year and any significant changes to the plan COMMITTEE COMPOSITION Deloitte has been the Group’s auditors require Committee approval. Significant AND EVALUATION since 2002. The lead audit partner rotates issues identified within internal audit reports The Committee and its members were every five years. The latest rotation took are considered in detail by the Committee formally assessed by the Nomination and effect during 2019 when Robert Topley along with the remediation plans to resolve Governance Committee as part of the review replaced Richard Muschamp as the Group’s those issues. The Committee regularly of Committee composition in 2019 and as lead audit partner, in respect of accounting considers the level of internal audit resource part of the Board evaluation process periods commencing from 1 January 2019. to ensure it is appropriate to provide the described on page 103 for their technical The Committee oversaw the completion right level of assurance over the principal suitability to be members and also for the of the lead audit partner transition process risks and controls throughout the Group. Committee’s overall effectiveness. The Board during 2019. In 2019, the effectiveness of The Committee Chairman holds regular has designated the Committee Chairman as the external audit process was evaluated update meetings with the Director of the Committee’s financial expert for through the Committee’s ongoing review Internal Audit, to ensure the internal audit Sarbanes-Oxley Act (SOX) purposes and of the external audit planning process and function has adequate standing, is free from together with Tarek Farahat as having recent discussions with key members of the Group’s management restrictions and has direct and relevant financial experience for the finance team. The Committee considered access to the Committee if required. purposes of the UK Corporate Governance the Audit Quality Review’s 2018/19 Audit Code and competence in accounting or Quality Inspection Report on Deloitte and INTERNAL FINANCIAL CONTROL audit for the purposes of DTR 7.1. The the actions taken by Deloitte to address the The Committee carried out an in-depth members of the Committee are considered findings in that report. The 2019 evaluations review of the Group’s internal financial by the Board to be independent and (when concluded that there continued to be a control system, with a focus on monitoring, considered as a whole) have competence good quality audit process and constructive remediation and compliance with Section relevant to the sectors in which the challenge where necessary to ensure 404 of SOX. A material weakness has been Company operates, and have financial balanced reporting. The Committee held identified and management are changing experience as set out on pages 96 and 97. private meetings with Deloitte and the the approach to determining inputs with Committee Chairman met privately with respect to the discount rates used in Sandrine Dufour has been appointed as an Deloitte before each meeting. The impairment assessments and establishing a additional member of the Committee with Committee continues to be satisfied with review process over inputs and the overall effect from 3 February 2020. Sandrine is the performance of Deloitte and confirms discount rate methodology. The identified currently Chief Financial Officer of Proximus that Deloitte continues to be objective and material weakness has not resulted in a and will become CFO of UCB on 1 July 2020. independent. The Committee recommends material misstatement in the year ended Sandrine has recent and relevant financial the reappointment of Deloitte at the 31 December 2019 or in any prior years. experience for the purposes of the UK 2020 AGM. Corporate Governance Code and NON-AUDIT FEES competence in accounting or audit for The Committee considered the Group’s The Committee has a policy regarding the purposes of DTR 7.1. position on its audit services contract in the non-audit services that may be provided by context of the regulations concerning the Deloitte, which was most recently updated TERMS OF REFERENCE audit market. Although there is no immediate in April 2020. The policy prohibits certain The Committee’s terms of reference are intention to tender the audit contract, the categories of work in line with relevant adopted by the Board and reviewed annually Company will re-tender at the latest by the guidance on independence, such as the FRC by the Committee, most recently on 19 2022 year-end in compliance with the Ethical Standard and rules issued by the SEC. March 2020. A copy of the Committee’s transitional arrangements for competitive The prohibited categories of work include terms of reference is available on the tender that require mandatory rotation after advice on remuneration and on tax services Company’s website at wpp.com/investors/ the 2023 fiscal year-end. being provided by Deloitte and a general corporate-governance. default to an alternative provider elsewhere The Company confirms that it has complied subject to adherence to regulations. Other with the Competition and Markets Authority categories of work may be provided by final order on mandatory tendering and Deloitte if appropriate and if pre-approved Audit Committee responsibilities. by the Committee, either as individual assignments or as aggregate amounts for Jacques Aigrain INTERNAL AUDIT specified categories of services. All fees are Chairman of the Audit Committee The annual internal audit plan, including summarised periodically for the Committee 29 April 2020 the list of units for internal audit review, to assess the aggregate value of non-audit is approved by the Committee at the fees against audit fees. The level of fees for beginning of the financial year. Progress 2019 is shown in note 3 to the financial against the plan is monitored throughout the statements on page 154.

WPP ANNUAL REPORT 2019 111 CORPORATE GOVERNANCE

COMPLIANCE WITH THE CODE

This statement of compliance summarises how The Board considers that WPP complied in all material respects with the principles and the Company has implemented the principles provisions of the Code during 2019 except that we recognise that we have not complied fully and provisions of the 2018 UK Corporate with Provision 41 to engage with the workforce on alignment of executive pay with the wider Governance Code (the Code). The Code is Company pay policy nor Provision 38 in aligning Executive Director pension payments with available at www.frc.org.uk. the wider workforce. Both of these provisions will be addressed in 2020. The information provided below and on the next page sets out how the Company has applied the principles of the Code. In addition, we have included information in relation to those provisions in the Code that contain an explicit disclosure requirement.

1. BOARD LEADERSHIP AND COMPANY PURPOSE 2. DIVISION OF RESPONSIBILITIES 5. REMUNERATION

A. BOARD’S ROLE D. STAKEHOLDER ENGAGEMENT F. THE ROLE OF THE CHAIRMAN The Board is responsible to shareholders for the The relationship with shareholders, potential The Board is chaired by Roberto Quarta, who chairs Company’s financial and operational performance shareholders and investment analysts is given the Nomination and Governance Committee and and risk management, and the culture embedded high priority by the Company as detailed on is a member of the Compensation Committee. across the Group, and is collectively responsible pages 104 and 105. The Chairman attended all meetings of the Audit for promoting the long-term success of the Committee during 2019 at the invitation of its Company. There is a formal schedule of matters The Company has a well-developed and Chairman. The Chairman provides the leadership reserved to the Board which is published on the continuous programme to address the needs of the Board and is the main point of contact Company’s website. The key focus of the Board’s of shareholders, investment institutions and between the Board and the CEO. The Chairman activities in 2019 have been oversight of the analysts for a regular flow of information about represents the Board in discussions with implementation of the three year transformation the Company, its strategy, performance and shareholders and investor bodies, ensures that plan with considerable time devoted to the competitive position. Given the wide geographic systems are in place to provide Directors with disposal of 60% of Kantar, board succession for distribution of the Company’s current and potential timely and accurate information, represents the both Non-Executive Directors and the new Chief shareholders, this programme includes regular Company in external meetings, and is also Financial Officer, risk and controls as described on visits to investors, particularly by the Chief responsible for the Board governance principles. page 80 and the progress of embedding the right Executive Officer, the Chief Financial Officer and The Chairman has led the ongoing emphasis on culture across the Group as described on pages 44 the Group Investor Relations Director, in the UK, management development and CEO and senior and 45 and in the Chief Executive’s statement on Continental Europe and the major financial centres management succession planning. page 3. in North America and also in Asia Pacific and Latin America. The Company’s Chairman meets with G. COMPOSITION OF THE BOARD B. PURPOSE AND CULTURE investors and regularly consults with investors’ As at the date of this report, the Board is The Company’s new purpose, values and governance representatives and advisory bodies. composed of 15 Directors. Three current members standards were a fundamental part of the Group’s The Company provides a preliminary announcement, are Executive Directors and 12, including the transformation strategy announced in December an interim management statement at the end of Chairman, are Non-Executive Directors. As 2018 and the Board is committed to championing the first and third quarters that includes a trading discussed on page 101 each of the Non-Executive and embedding these across the Group. The Board update, an interim report at half year and a trading Directors is considered to be independent by receives regular reports from the Chief People update and presentation at the AGM. the Nomination and Governance Committee. Officer on progress on delivering our new culture characterised by the values of openness, optimism E. WORKFORCE ENGAGEMENT Responsibility for the development and and a commitment to extraordinary work, which is To ensure the Board engages with the people implementation of Company policy and strategy described is on page 45. In addition, the Audit working within the Group across 112 jurisdictions and for day-to-day management issues is Committee receives reports from the Head of and multiple businesses and understands their delegated by the Board to the Chief Executive Business Integrity on the Right to Speak reports views on WPP’s purpose, values and strategy, Officer and Chief Financial Officer. The list of received and how many of those relate to culture the Board has adopted a number of engagement matters reserved to the Board can be downloaded or behavioural issues and the cultural issues methods. The first People Forum was established from wpp.com/investors/corporate-governance. identified in the risk assessment conducted in 2019 in the UK in 2019 with the support of our UK across the Group and the actions to be taken to Country Manager and further forums will be With only specific exceptions to ensure Board address the risks identified. established in other countries starting with continuity, Non-Executive Directors shall not stand India in 2020. The Board has designated two for re-election after they have served for the C. RESOURCES AND CONTROLS of the Non-Executive Directors to be responsible period of their independence, as determined by The Board is responsible to shareholders for the for engaging with our people and ensure their applicable UK and US standards, which is nine Company’s financial and operational performance voice is heard in the Board and for attending years. Three long-serving Non‑Executive Directors and risk management. Matters delegated to the meetings of the forums. The Board receives Solomon Trujillo, Sir John Hood and Daniela Riccardi Chief Executive and Chief Financial Officer include regular reports from these Non-Executive Directors will not stand for re-election at the 2020 AGM. managing the Group’s business in line with the and further details can be found on page 106. The transformation plan and risk governance framework. Chief Executive held the first Global Town Hall in H. ROLE OF NON-EXECUTIVE DIRECTORS The WPP Risk Committee established in 2019 2019 and in 2020 WPP will launch the first The Non-Executive Directors provide constructive together with the Risk Committees set up across Group-wide survey. challenge and assistance to the Chief Executive the businesses also in 2019 assist the Board in the Officer in developing the Company’s strategy. oversight and mitigation of risks to which the Group is or may be exposed. Further information about The Senior Independent Director is Nicole the Group’s risk management can be found on Seligman who is available to shareholders and page 80 including the details of the new business acts as a sounding board for the Chairman and as integrity function and the controls function. an intermediary for the other Directors with the Chairman, when necessary. The Senior Independent Director’s role includes responsibility for the Chairman’s appraisal and succession and this year the Board evaluation process. Nicole Seligman was appointed to the Board in January 2014 and is a

112 WPP ANNUAL REPORT 2019 COMPLIANCE WITH THE CODE CORPORATE GOVERNANCE

1. BOARD LEADERSHIP AND COMPANY PURPOSE 2. DIVISION OF RESPONSIBILITIES member of the Compensation Committee and K. SKILLS, EXPERIENCE AND KNOWLEDGE OF THE 5. REMUNERATION the Nomination and Governance Committee. BOARD AND ITS COMMITTEES As the Senior Independent Director, Ms Seligman The Non-Executive and Executive Directors have a P. REMUNERATION POLICIES AND PRACTICES customarily attends the Audit Committee meetings diverse range of skills, experience and backgrounds. The Company’s compensation policy is designed at the invitation of the Chairman of that Committee. As detailed in their biographies on pages 96 and 97, to attract the best talent and ensure people are the Directors work across the globe in media and rewarded fairly and competitively. The policy sets Letters of appointment for Non-Executive Directors advertising, investment banking and investment out a reward structure that looks at the short, do not set out a fixed time commitment for Board management, pharmaceuticals, logistics and medium and long term and is designed to promote attendance and duties but give an indication of the bioenergy, FMCG, international management sustainable performance aligned with shareholder likely time required. It is anticipated that the time consulting, private equity and angel investing, interests. Shareholders approved the Directors’ required by Directors will fluctuate depending on business education, manufacturing, consumer Compensation Policy at the 2017 AGM and this is the demands of the business and other events. products and retail management, internet start-ups, available on the Company’s website. government and non-profit organisations. The Board Details of 2019 Board attendance at Board and is committed to ensuring that all appointments to Q. PROCEDURE FOR DEVELOPING Committee meetings are set out on page 100. the Board are made on merit and after a thorough REMUNERATION POLICY recruitment process as detailed on page 108 and The Compensation Committee is responsible for 3. COMPOSITION, SUCCESSION with due regard for diversity and inclusion. setting and managing the compensation of all AND EVALUATION Executive Directors. Controls and procedures are L. BOARD EVALUATION in place to manage compensation of all other J. APPOINTMENTS TO THE BOARD Nicole Seligman, the Senior Independent Director, employees in the Group. Refer to the Compensation The Nomination and Governance Committee has conducted an internal evaluation of the Committee report on pages 114-137 for details of the leads the process for appointments to the Board effectiveness of the Board in 2019, building on work of the Compensation Committee during 2019. and makes recommendations to the Board. The the work of Dr Tracy Long of Boardroom Review Nomination and Governance Committee is chaired Limited, an external facilitator with no connection R. EXERCISING INDEPENDENT JUDGEMENT by the Chairman of the Board and comprises only to WPP, who was engaged to lead the Board The Compensation Committee is composed of Non-Executive Directors. The terms of reference effectiveness evaluation in 2018. More information five Non-Executive Directors who meet both with of the Nomination and Governance Committee on the evaluation is on page 103. and without management present and who seek are available on the Company’s website at where appropriate, independent advice from wpp.com/investors/corporate-governance. 4. AUDIT, RISK AND INTERNAL CONTROL Towers Watson and external lawyers, to ensure During 2019, three Non-Executive Directors were independent judgement. The Compensation appointed to the Board, Cindy Rose OBE on 1 April M. INTERNAL AND EXTERNAL AUDIT Committee determines remuneration outcomes 2019, Jasmine Whitbread on 1 September 2019 The Audit Committee monitors the independence by assessing executive performance against and Keith Weed on 1 November 2019. In addition, and effectiveness of the internal audit function and performance criteria which are set out in the Sandrine Dufour was appointed to the Board as external auditors and receives regular reports from Compensation Committee report on pages 114-137. a Non-Executive Director and John Rogers was each at the Audit Committee meetings and reports appointed as Chief Financial Officer Designate and back to the Board at each Board meeting. Refer to elected to the Board on 3 February 2020. For more the Audit Committee report on pages 109-111 for details on the appointment process refer to the details of the work of the Audit Committee during Nomination and Governance Committee report on 2019. Details of the Company’s internal audit page 108. Three Non-Executive Directors will be function are included on page 83. retiring at the AGM in 2020 and Paul Richardson will retire from the Company on 1 May 2020, following N. FAIR, BALANCED AND UNDERSTANDABLE which the Board will be composed of 11 Directors. ASSESSMENT The independence of each Non-Executive Director The Board is responsible for the presentation of is assessed annually by the Board. The Board has a fair, balanced and understandable assessment confirmed that all of the Non-Executive Directors of the Company’s position and prospects, within standing for election and re-election at the 2020 the Annual Report as well as in all publicly available AGM continue to demonstrate the characteristics financial information. We have an appropriate of independence. system in place to meet this responsibility. See page 109 for further information.

O. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK The Board is responsible for aligning the risk appetite of the Group with the long-term strategic objectives, taking into account the principal and emerging risks faced by the Group. See pages 80-83 for further details of our risk management framework.

WPP ANNUAL REPORT 2019 113 CORPORATE GOVERNANCE

COMPENSATION COMMITTEE REPORT

LETTER FROM THE CHAIRMAN OF THE COMPENSATION COMMITTEE

“ THE COMMITTEE’S KEY DEAR SHAREHOLDER, FOCUS IS TO ENSURE OUR I am pleased to present the Directors’ Compensation report for the financial year COMPENSATION STRUCTURE ended 31 December 2019. In my introductory ALIGNS THE INTERESTS letter I describe the key items considered by OF EXECUTIVES TO THOSE the Committee during the year, including the OF OUR SHAREHOLDERS review of our Compensation Policy, annual short- and long-term incentive outcomes, AND IS IMPLEMENTED FAIRLY and Executive Director appointment and AND RESPONSIBLY.” departure terms.

Sir John Hood The Company issued on 31 March 2020 an Chairman of the update on the impact of Covid-19 on the Compensation Committee Company and the measures taken to protect our employees, clients and the financial position of the business. Included within the announcement was a plan to cut costs and this included a decision for the Board, as well as members of the WPP Executive Committee, to take a 20% reduction in their salaries or fees for an initial period of three months. These have been implemented Committee Members in 2019 effective 1 April 2020. –– Sir John Hood (Chairman) –– Jacques Aigrain In line with the three-year life cycle, a new –– Roberto Quarta Directors’ Compensation Policy is being put –– Nicole Seligman forward to a binding shareholder vote at our –– Jasmine Whitbread 2020 AGM. On the following pages, I have (appointed 1 September 2019) set out our new Compensation Policy and Highlights our Annual report on compensation for 2019, –– Reviewing the Directors' which explains how we implemented the Compensation Policy Policy previously approved by shareholders, –– Proposing changes to ensure as well as how we intend to implement the alignment with strategy and new Compensation Policy if approved at the changes to the UK Corporate AGM. The Annual report on compensation will Governance Code be subject to an advisory shareholder vote. –– Consultation with our shareholders CHANGES TO THE DIRECTORS’ Key responsibilities COMPENSATION POLICY –– Aligning compensation to During 2019 the Committee spent a business strategy and considerable amount of time debating the shareholder interests changes that were needed to the Directors' –– Setting measures and targets Compensation Policy. Our focus was on for the incentive plans ensuring that it was aligned with the new –– Ensuring that our practice WPP strategy and provided the right tools aligns with corporate to enable the Company to attract and retain governance standards the quality of talent required in this complex organisation. We were also committed to ensuring our new Compensation Policy adheres to the principles of good governance as set out in the UK Corporate Governance Code. The changes to the policy, on which we have consulted with our

To learn more see wpp.com/about/ corporate-governance

114 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

shareholders, are set out in summary and PAY FOR PERFORMANCE 2019 Paul will be succeeded by John Rogers, detail later in the report. There are some WPP operates an annual short-term incentive who joined the Company in January 2020 important changes to which I would like to plan that is strongly aligned to performance, and was appointed to the Board as Chief draw your attention. measured against targets set at the start of Financial Officer Designate on 3 February the year, for revenue, margin and profit. 2020. John was appointed on a competitive For many years, WPP has utilised a long-term In 2019, the first complete year under the salary package in line with our Policy, that incentive plan based on a five-year leadership of Mark Read who, with his we disclosed on the announcement of performance and vesting period. In recent management team, started implementing his appointment. years it has become clear that a five-year the transformation strategy that he set out performance period was poorly aligned to to shareholders in late 2018, the executives This is my last letter and report to the business cycle and speed of change produced a strong performance in shareholders of WPP as I will be stepping within our industry. It has lost some of its challenging market conditions. down at the AGM. During my tenure, with the effectiveness as an incentive to motivate support of my fellow Committee members, management and was unattractive to new The individual strategic objectives of the I believe we have addressed the many hires. We are therefore proposing to adopt executives, which covered a range of business challenges that have been presented to us the more commonly used UK approach of a priorities including the sale of a majority and are now in a position where we have a performance share plan with a three-year share of Kantar, further strengthening of policy and set of plans that meet the highest performance period followed by a two-year financial controls and efficiencies, and people, levels of UK corporate governance. I am holding period for the vested shares. While culture and diversity, were successfully handing over the chair to Jasmine Whitbread making this change, we have also taken delivered and these are reflected in the STIP who has been a member of our Committee the opportunity to review the performance outcomes set out in detail in the report. during the last year and brings considerable measures to ensure they align to the WPP relevant experience to the role. strategy. For 2020, we will assess The 2015 Executive Performance Share Plan performance using three measures: total (EPSP) award completed its five-year I would like to take the opportunity to shareholder return (TSR), return on invested performance period at the end of the acknowledge and thank my fellow capital (ROIC) and cumulative free cash financial year. Over the performance period, Committee members, management and flow (CFCF). our TSR and earnings per share (EPS) advisors for their support during my period performance were below the targets that we as Committee Chairman. The effects of the Covid-19 virus on our had set resulting in a zero-vesting result for business are not yet clear but it will have those performance elements. The return on a material adverse impact on our financial equity (ROE) target was met resulting in a results. We are therefore taking the unusual modest vesting level and small payout to step of not, at this stage, setting out the the executives. financial targets for the ROIC and CFCF Sir John Hood measures which would be set using 2020 BOARD CHANGES Chairman of the financial forecasts. However, shareholders As previously announced, Paul Richardson Compensation Committee will be consulted on the targets before any will step down from the Board and his 29 April 2020 awards are granted later in the year when position as Group Finance Director with the situation is clearer. effect from 1 May 2020. The Committee has agreed that Paul will be treated in The other key changes we are proposing accordance with the Policy and will be paid respond to the enhancements in the his salary, pension and benefits up to his Corporate Governance Code and the leaving date. In addition, he will be paid for developments in the UK market with the his outstanding holiday entitlement. He will inclusion of a stronger set of malus and be ineligible for any STIP in 2020 and also for clawback conditions providing the Committee the 2019 deferred share bonus award. His with much broader powers, the formal outstanding share awards will be prorated, inclusion of post-employment shareholding and to the extent performance targets are requirements and the alignment of the achieved, will vest on the scheduled vesting executive directors’ pension provision with dates. Paul will be required to hold shares that of the wider UK workforce. equal to 300% of his salary for one year post-retirement and 150% of his salary for the second year.

WPP ANNUAL REPORT 2019 115 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT

COMPENSATION AT A GLANCE

GROUP FINANCIAL PERFORMANCE MEASURES 2019

LIKE-FOR-LIKE HEADLINE PBT GROWTH HEADLINE OPERATING MARGIN LIKE-FOR-LIKE GROWTH IN REVENUE LESS % IMPROVEMENT PASS-THROUGH COSTS % %

Actual Actual Actual

-8.5 -1 -1.3

Threshold Target Maximum Threshold Target Maximum Threshold Target Maximum -10% -5% 0% -1.5% -1% 0% -3.0% -1.75% -0.5%

LONG-TERM PERFORMANCE WPP Total Shareholder Return (TSR) %

FTSE 100 S&P 500 WPP

131 20Y 135 319 131

160 10Y 115 363 160

(4) 5Y 35 116 (4)

27 1Y 14 22 27

Source: DataStream. TSR calculated up until 31 December 2019.

LONG-TERM (EPSP) PERFORMANCE MEASURES % Actual 0% (of max) Actual 0% (of max) TSR* EPS (common 40 1.24 currency) Nil Threshold Maximum Nil Threshold Maximum 0 50% outperformance 90% outperformance 0 7 14

44% Actual 0% (of max) Actual (of max) TSR* ROE (local 42 15.91 currency) Nil Threshold Maximum Nil Threshold Maximum 0 50% outperformance 90% outperformance 0 15 18

* Outperformance of peer group

116 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

TOTAL COMPENSATION 2019 £000

Mark Read* Paul Richardson

2019 2,594 2019 2,030

2018 965 2018 2,125

0 1,000 2,000 3,000 4,000 0 1,000 2,000 3,000 4,000 • Fixed, consisting of base salary, benefits and pension • Short-term incentives (STIP) • Long-term incentives Executive Performance Share Plan (EPSP) * Mark Read was appointed as CEO on 3 September 2018 and his total compensation for 2018 reflects his time in role.

HOW WE WILL IMPLEMENT OUR PROPOSED COMPENSATION POLICY IN 2020

Policy 2020 2021 2022 2023 2024 Implementation for 2020

Base salary Typically 24-month review period, with Mark Read: £975,000* flexibility for annual review if appropriate John Rogers: £740,000*

* Salaries will be reduced by 20% for an initial period of three months from 1 April as a result of the impact of Covid-19.

Benefits A fixed benefits allowance will be Mark Read: £35,000 provided as an alternative to the provision John Rogers: £30,000 of itemised benefits, to be used at the executive’s discretion

Pension Pension is provided by way of a contribution Mark Read*: 17.6% to a defined contribution arrangement, John Rogers: 10% or a cash allowance, determined as a percentage of base salary * To be reduced during the policy period as part of plans to align executive pensions with the wider workforce.

Short -term –– 75%-100% financial Cash Deferred shares Mark Read: 0-250% incentives –– 0%-25% individual strategic objectives John Rogers: 0-225% –– One-year performance period 75% financial and 25% –– 60% cash, at least 40% deferred non-financial targets into WPP shares (two years)

Long -term –– TSR, ROIC and Cumulative Performance period Holding period Mark Read: 0-350% incentives Free Cash Flow John Rogers: 0-300% –– Three-year performance period –– Two-year holding period

WPP ANNUAL REPORT 2019 117 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT

DIRECTORS' COMPENSATION This section of the report sets out the Directors’ Compensation Policy which shareholders will be POLICY asked to approve at the 2020 AGM. Until this time, the Policy approved by shareholders on 7 June 2017 will continue to apply.

SUMMARY OF PROPOSED CHANGES TO THE DIRECTORS' COMPENSATION POLICY

ELEMENT OF COMPENSATION PROPOSED CHANGES

● Base salary The new policy allows for flexibility to review base salaries on an annual basis rather than biennially if the Committee deems this appropriate. The Compensation Committee will also have the discretion to realign base salary over a phased period for new Board appointments whose starting salary is below the competitive market level.

The inclusion of a £100,000 Director fee has been removed. This was a legacy arrangement applicable to Paul Richardson only.

● Benefits The annual fixed benefits allowance has been reduced from £200,000 for the CEO and £85,000 for the CFO to a maximum of £50,000 for all executives.

● Pension Following the provisions in the new UK Corporate Governance Code to align executive pensions with those of the wider workforce, we have reduced the pension provision available to new Executive Directors to 10%. This level has been applied to the newly appointed Chief Financial Officer. Over the course of the next policy period, the CEO’s contribution will be phased down to this level. During 2020, as far as practicable, the average maximum pension contribution available to employees across the UK will be increased to 10% from the current average rate of 5% to ensure alignment.

● Short -term incentive plan The overall quantum of the short-term incentive plan has been reduced from a maximum of 400% of base salary for the CEO and 250% of base salary for other directors to a maximum of 250% of base salary for all executives. The target incentive is 50% of maximum for all directors. A significant proportion of the STIP will continue to be deferred into shares for a period of two years. Performance measures and targets are reviewed annually to ensure they align with current business priorities.

● Long -term incentive plan – Structure: Executive Performance Share The performance period for the EPSP has been reduced from five years, to three years combined with a two-year holding Plan (EPSP) period. The change in performance period is designed to enhance alignment to Company business strategy and improve the effectiveness of the plan to attract, retain and motivate executives. The overall five-year holding period maintains the long-term alignment with shareholders that is a critical feature of the policy.

Current

Five-year performance period

Proposed

Three-year performance period Two-year holding period

Performance measures: The current EPSP financial measures of EPS and ROE will be replaced with cumulative free cash flow (CFCF) and return on invested capital (ROIC). These measures have been chosen on the basis that they are closely aligned with the WPP strategy to ensure long-term efficiency, profitability and cash generation. In addition, the TSR peer group will be reviewed to reflect the current key competitors of the Company.

Current

TSR EPS ROE

Proposed

TSR Cumulative Free Cash Flow Return on Invested Capital

Quantum: The new policy proposes a reduction in maximum from 975% of base salary to 400% of base salary. The maximum level will be used in exceptional circumstances only. The threshold vesting level will increase from 15% to 20%.

118 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

OVERVIEW OF OTHER CHANGES TO POLICY

POLICY AREA PROPOSED CHANGES

● Post-employment Post-employment shareholding requirements will be formally introduced requiring Executive Directors to hold 100% of shareholding requirements their shareholding requirement for the first year following departure, reducing to 50% for the second year. The post- employment requirement was set taking into account the level of the shareholding requirement for the CEO and CFO at 600% and 300% respectively which is considerably higher than typical UK market norms.

● ● Malus and clawback A standalone malus and clawback policy has been implemented which applies to all the incentive plans. The policy includes a broad list of events in which malus and clawback may be applied and a defined decision-making process. The Compensation Committee have far-reaching powers to ensure they can use judgement in a broad range of circumstances.

Appointments to the Board The aggregate maximum level of ongoing variable compensation that can be awarded to a newly appointed Executive Director has been reduced from 8 times to 6.5 times base salary. This aligns with changes to limits on short- and long-term incentive levels.

GUIDING PRINCIPLES Our Directors’ Compensation Policy is designed in the context of the UK Corporate Governance Code to attract and retain best-in-class talent and incentivise Directors to deliver growth, creativity and outstanding performance, thereby producing long-term value for shareholders.

The WPP Directors’ Compensation Policy is determined by the following guiding principles:

Our compensation structure has a high proportion Fixed pay / 29% of performance-based variable compensation. STIP / 29% EPSP/ 42% PERFORMANCE-

DRIVEN Value of CEO's compensation REWARD package at target

Director compensation is designed to attract and retain best-in-class talent.

COMPETITIVENESS

Director pay packages have a large portion paid in the form of shares linked to strategically aligned performance measures. LONG-TERM Directors have significant share ownership requirements both ALIGNMENT WITH during and post-employment. SHAREHOLDER INTERESTS

Our incentive plans are structured in a way that drives performance in line with strategy and promotes long-term ALIGNMENT TO alignment with shareholders. WPP STRATEGY AND VALUES

WPP ANNUAL REPORT 2019 119 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT DIRECTORS' COMPENSATION POLICY

ALIGNING INCENTIVE PLANS WITH STRATEGY

Performance measures are selected to align to the immediate and long-term business strategic priorities appropriate at the time.

Headline operating profit Strategy for growth, simplification, collaboration

Short-term Operating profit margin improvement Simplification of operating structure incentive plan

Organic growth Strategy for growth, creativity, value-enhancing customer proposition

Relative TSR Improving competitive position against peers

Long-term ROIC Long-term efficiency, profitability, debt management incentive plan (EPSP)

Cumulative free cash flow Long-term cash generation

CONSIDERATIONS TAKEN INTO ACCOUNT WHEN SETTING SHAREHOLDER VIEWS OUR DIRECTORS’ COMPENSATION POLICY The Committee has consulted with key shareholders throughout EMPLOYMENT CONDITIONS AT WPP the development of the updated Directors’ Compensation Policy. We have set the WPP Directors’ Compensation Policy in the context The feedback received during these conversations was valuable and of the policies and practices that apply to the wider workforce. was among the factors that informed the decisions made by the Committee. WPP has worked diligently to listen to all views and create a policy that is both acceptable to shareholders as well as attractive to and likely to retain Executive Directors. WPP continues to engage openly with shareholders and institutional investors to discuss matters relating to compensation.

PROPOSED NEW POLICY FIXED ELEMENTS OF COMPENSATION

COMPONENT, PURPOSE AND LINK TO STRATEGY OPERATION OPPORTUNITY ● Base salary Base salary is typically reviewed every two years but may be reviewed annually if the Increases for executives will usually To maintain package Committee deems appropriate. be aligned to the wider workforce competitiveness and which will reflect the performance The Committee may realign base salary over a phased period for new Board appointees reflect skills and of the Company, individual and local who start on a lower-than-market salary. experience; to enable economic factors. recruitment and retention. Salary levels and increases take into consideration: Increases above the normal level –– salary increases awarded across the Group may be made to take into account –– individual performance special circumstances such as: –– levels in other companies of similar size, scope and complexity. –– increase in the nature or scope of the role –– to reflect development in a role such as in the case of an executive appointed at a below-market salary.

● Benefits The fixed annual allowance will be reviewed periodically by the Committee and any The maximum benefit allowance Provide an annual fixed changes will be effective for the next fiscal year. The allowance is set with regard to payable is £50,000. and non-itemised the individual concerned and the role they undertake. allowance, to enable the Should the executive be required to move to a different country, a relocation benefit executive to procure may be provided in addition to the usual benefit allowance. benefits to enable them to undertake their role and ensure their wellbeing and security.

120 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

COMPONENT, PURPOSE AND LINK TO STRATEGY OPERATION OPPORTUNITY ● Pensions Pension is provided by way of contribution to a defined contribution retirement Executive Director: 10% of To enable provision for arrangement, or as a cash allowance, determined as a percentage of base salary. base salary. retirement benefits. Current: CEO – 20% of base salary less Employer's NIC (17.6% net) reducing to 10% over the 2020 to 2022 Policy period. CFO – 10% of base salary.

VARIABLE ELEMENTS OF COMPENSATION

COMPONENT, PURPOSE AND LINK TO STRATEGY OPERATION OPPORTUNITY PERFORMANCE ● Short -term incentive plan Targets are set early in the year. The Committee Maximum opportunity Performance measures and targets (STIP) determines the extent to which these targets have –– 250% of base salary are reviewed and set annually to –– Cash bonus been achieved at the end of the year based on ensure continued strategic Target opportunity –– Executive Share Award the performance. alignment. –– 50% of the maximum (ESA) The STIP is delivered as follows: opportunity Financial measures may represent a minimum of 75% of the award and To drive the achievement –– at least 40% of the STIP pay-out is delivered in the Less than the maximum a maximum of 100%. of strategic priorities for form of conditional deferred shares (ESA) which opportunity may be applied the financial year and to will be released after a period of two years. to executives. Individual strategic or non-financial motivate, retain and reward objectives may represent up to 25% –– the Committee has discretion to adjust the Dividends will accrue on the executives over the short of the award. formulaic bonus outcomes both upwards and ESA during the deferral period. and medium term. downwards (including to zero) if it is determined The ESA element of the that performance has been impacted by incentive aligns executives unforeseen circumstances and the outcome is not with shareholder interests. reflective of the underlying company performance. –– STIP is subject to the malus and clawback policy.

● Long -term incentive plan The EPSP comprises a grant of performance share Maximum opportunity Vesting of the EPSP is subject to – Executive Performance awards which will vest subject to the achievement –– 400% of base salary the achievement of demanding Share Plan (EPSP) of performance conditions. performance targets. Less than the maximum To drive the achievement The EPSP has a performance period of three opportunity may be applied Performance measures are set by of long-term strategic years, followed by a two-year holding period of to executives. the Committee and may be a mix of priorities, to aid retention the vested shares. market, financial and non-financial and to align executive and Dividends will accrue on awards measures. In 2020 the measures will shareholder interests over The Committee has the discretion to adjust the during the performance period. be relative TSR, ROIC and the long term. formulaic outcome of the award to ensure that cumulative free cash flow. vesting reflects underlying Company performance and value creation for share owners. Threshold performance will produce an award of 20% of the EPSP is subject to the malus and clawback policy. award granted and increase on a sliding scale to 100% for maximum performance achievement. Full details of the awards are in the Annual report on compensation.

● Shareholding requirements Executive Directors and other members of the Chief Executive Officer: If an Executive Director fails to To align the interests of senior management team are subject to share 600% of base salary. achieve the required levels of share Executive Directors with ownership guidelines which seek to reinforce ownership, the Committee will Chief Financial Officer: shareholders. the WPP principle of alignment of management’s decide what remedial action or 300% of base salary. interests with those of shareholders. penalty is appropriate. This may Executive Directors are Minimum for any other new involve a reduction in future share required to hold 100% executive appointed to the awards or requiring the director to of their shareholding Board: 200% of base salary. purchase shares in the market to requirement for a period meet the ownership guidelines. of one year following Executive Directors will be cessation of employment, permitted a period of seven If the Executive Director fails to reducing to 50% for a years from the date of their maintain their shareholding second year. appointment to achieve the requirement post‑employment, guideline level. this may result in a reduction of outstanding awards.

WPP ANNUAL REPORT 2019 121 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT DIRECTORS' COMPENSATION POLICY

NOTES TO THE POLICY TABLE Plan rules EPSP ensures the continued alignment of the interests Copies of the various plan rules are available for The EPSP performance measures are selected to of shareholders and senior individuals within the inspection at the Company’s registered office and complement the annual STIP measures and capture Group, but also enables the Group to attract, retain head office. the longer-term performance of the Company. and motivate the talented people upon whom our success depends. The Directors’ Compensation Policy table for Cumulative free cash flow is a measure that is Executive Directors provides a summary of the key important for both management and our Stock Plan 2018 provisions relating to their ongoing operation. shareholders, capturing growth in revenue and The WPP plc Stock Plan 2018 is used to satisfy profitability. Return on invested capital is similarly awards under the short-term incentive plans The Committee has the authority to ensure that any important and provides a positive counterbalance (including ESAs) as well as to grant awards to awards being granted, vested or lapsed are treated and risk management mechanism through the focus management under the WPP Leaders, Partners and in accordance with the plan rules which are more on both growth and capital efficiencies. With the High Potential programme. In this programme, extensive than the summary set out in the table. inclusion of relative TSR, the plan also takes account awards are made to participants that vest three of shareholder views of how WPP has performed years after grant, provided the participant is still Selection of performance measures relative to the companies in the peer group. employed within the Group. Performance measures are selected by the Committee based on their alignment with Operational targets under the EPSP are set taking Executive Directors, and other senior management strategic priorities and the key metrics used into account a combination of factors, but primarily employees, receive part of their annual bonus across the business. internal forecasts, analysts expectations and entitlement as a deferred share award (ESA) under historical performance relative to budgets. the Stock Plan 2018. Executive Directors are STIP ineligible to participate in any other aspect of STIP measures are reviewed annually by the Relative TSR targets are set to ensure they are the management share award programme, other Committee taking into account business stretching and require out-performance of half of than in relation to awards granted prior to performance and priorities. The performance our peer group before any reward is triggered. appointment or in relation to awards granted targets for the STIP are set to incentivise Cascade to WPP Group pay policy to buy-out previous awards on appointment. year-on-year growth and to reward strong, As well as setting the policy for the Executive sustainable performance. Strategic targets are Share Option Plan 2015 Directors, the Committee is also responsible for based upon the annual business priorities. The The WPP plc Share Option Plan 2015 is an managing the compensation of the Executive Committee is of the view that the targets for the all-employee plan that makes annual grants of Committee and the Company Secretary. STIP are commercially sensitive and it would be stock options to employees with two years of detrimental to the Company to disclose them in Compensation packages for these individuals are service who work in wholly-owned subsidiaries. advance of or during the relevant performance normally reviewed every 18-24 months. As is the This plan replaced the legacy Worldwide period. The Committee will disclose those targets case for Executive Directors, the WPP Group pay Ownership Plan. at the end of the relevant performance period in policy ensures a clear and direct link between the The WPP plc Share Option Plan 2015 has the that year’s Annual Report, if those targets are performance of the Group or relevant operating capability to make grants of executive share options. no longer commercially sensitive. company and compensation. Substantial use of performance-driven compensation not only

ILLUSTRATIONS OF TOTAL COMPENSATION The charts below provide an illustration of the potential future total remuneration of the Executive Directors. Four scenarios of potential outcomes are provided based on the assumptions set out in the notes below the charts. The charts are reflective of the pay policy that is being presented for approval at the 2020 AGM.

COPENATON CENARO £000 Mark Read (CEO) John Rogers (CFO DESIGNATE)

Fixed Fixed pay 100% 1,182 pay 100% 844

Target 29% 29% 42% 4,107 Target 30% 30% 40% 2,787

Maximum 17% 35% 48% 7,032 Maximum 18% 35% 47% 4,729

Maximum Maximum including including 13% 30% 38% 19% 8,738 14% 29% 38% 19% 5,839 share price share price appreciation appreciation

• Fixed, consisting of base salary, benefits and pension • Short-term incentives (STIP) • Long-term incentives (EPSP) • 50% share price appreciation

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NOTES TO THE COMPENSATION SCENARIO CHARTS The scenarios in the charts on the previous page have been calculated based on the following assumptions:

Fixed pay Consists of base salary, benefits and pension Base salary reflects current levels Pension reflects current levels

Target Assumes target STIP of 50% of maximum Assumes EPSP vesting of 50% of maximum

Maximum excluding any share price growth Assumes maximum STIP and maximum EPSP

Maximum including 50% share price growth Assumes maximum STIP, maximum EPSP and 50% share price appreciation on the EPSP element of the package

APPOINTMENTS TO THE BOARD BUY-OUT AWARDS Otherwise base salary, benefits and pension This section sets out details with respect to The Committee may consider buying-out allowance are payable as per the notice the appointment of a new Executive Director compensation entitlements that the period and the Committee will have the to the Board of WPP, whether it is an external individual has had to forfeit by accepting the power to make phased payments that would or internal appointment. appointment. The structure and value of the be reduced or stopped if alternative awards will be informed by the structure and employment is taken up. FIXED COMPENSATION value of those entitlements being forfeited, Base salary will be set considering a range and the performance targets, time horizon TERMS SPECIFIC TO INTERNAL of factors, including the profile and prior and method of payment will be set in an APPOINTMENTS experience of the candidate, internal appropriate manner at the discretion of The Committee can honour any pre-existing relativities, cost and external market data. the Committee. commitments if an internal candidate is If base salary is set at a lower initial level, appointed to the Board. contingent on individual performance, the The intention of the Committee is that any Committee retains the discretion to realign award will take the form of WPP shares and will the base salary over a phased period of be subject to performance as far as possible. one to three years following appointment, which may result in an exceptional rate of An announcement of the director’s annualised increase in excess of that set appointment, detailing the incumbent’s out in the policy table. compensation will be made on a timely basis through a regulatory information service and Other elements of fixed pay will be set in posted on the Company’s website. accordance with the policy table. A new appointment may require the Committee to SERVICE CONTRACTS rely on the authorised discretion (as set out The following terms will apply for any new on page 120) to make payments related to executive role appointed to the Board in relocation, for example, in order to facilitate the future: the appointment. –– executives will normally be appointed on a ONGOING VARIABLE COMPENSATION notice period of up to 12 months, although The Committee will seek to pay only that the Committee retains the discretion to level of reward necessary to recruit the appoint an external candidate on a notice exceptional talent needed to lead such a period of up to 24 months reducing on a complex global group. The actual level of rolling basis to 12 months (such that after incentive offered will be dependent on the 12 months’ service the notice period would role and existing package of the candidate. have reverted to the standard 12 months). The aggregate maximum face value for –– at the Committee’s discretion, any annual short- and long-term variable payment in lieu of notice will be restricted compensation will be 6.5 times base salary. to base salary, benefits and pension. On termination, entitlements will lapse when The Committee retains the discretion to classified as a bad leaver (defined within make awards on recruitment, within the the incentive plans). policy limits, to provide an immediate alignment of interest with the interests of shareholders.

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SERVICE CONTRACTS Name Effective from Notice period The Company’s policy on Executive Directors’ Mark Read 3 September 2018 12 months service contracts is that they should be on a John Rogers 27 January 2020 12 months rolling basis without a specific end date. The Executive Directors’ service contracts are available for inspection at the Company’s registered office and head office The effective dates and notice periods under the current Executive Directors’ service contracts are shown in this table:

LOSS OF OFFICE PROVISIONS FIXED COMPENSATION ELEMENTS As noted above, the service contracts of executives provide for notice to be given on termination.

The fixed compensation elements of the contract will continue to be paid in respect of any notice period. There are no provisions relating to payment in lieu of notice. If an Executive Director is placed on garden leave, the Committee retains the discretion to settle benefits in the form of cash. The Executive Directors are entitled to compensation for any accrued and unused holiday although, to the extent it is possible and in shareholder interests, the Committee will encourage Executive Directors to use their leave entitlements prior to the end of their notice period. Except in respect of any remaining notice period, no aspect of any Executive Director’s fixed compensation is payable on termination of employment.

SHORT- AND LONG-TERM COMPENSATION ELEMENTS If the Executive Director is dismissed for cause, there is not an entitlement to a STIP award, and any unvested share-based awards will lapse. Otherwise, the table below summarises the relevant provisions from the Directors’ service contracts (cash bonus) and the plan rules (ESA and EPSP), which apply in other leaver scenarios. As noted on page 122, the Committee has the authority to ensure that any awards that vest or lapse are treated in accordance with the plan rules, which are more extensive than the summary set out in the table below.

Cash bonus The Executive Directors are entitled to receive their bonus for any particular year provided they are employed on the last date of the performance period. ESA Provided the Executive Director is a Good Leaver, unvested awards will be reduced on a time pro-rata basis and paid on the vesting date. EPSP –– The award will lapse if the Executive Director leaves during the first year of a performance period. –– Provided the Executive Director is a Good Leaver, awards will vest subject to performance at the end of the performance period and time pro-rating. Awards will be paid on the normal date. –– In exceptional circumstances, the Compensation Committee may determine that an award will vest on a different basis. –– Generally, in the event of death, the performance conditions are to be assessed as at the date of death. However, the Committee retains the discretion to deal with an award due to a deceased executive on any other basis that it considers appropriate. –– Awards will vest immediately on a change-of-control subject to performance and time pro-rating will be applied unless it is agreed by the Committee and the relevant Executive Director that the outstanding awards are exchanged for equivalent new awards.

OTHER COMMITTEE DISCRETIONS NOT SET OUT ABOVE Leaver status: the Committee has the discretion to determine an executive’s leaver classification considering the guidance set out within the relevant plan rules.

Settlement agreements: the Committee is authorised to reach settlement agreements with departing executives, informed by the default position set out above.

124 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

EXTERNAL APPOINTMENTS Executive Directors are permitted to serve as non-executives on the boards of other organisations. If the Company is a shareholder in that organisation, non-executive fees for those roles are waived. However, if the Company is not a shareholder in that organisation, any non-executive fees can be retained by the office holder.

DIRECTORS’ COMPENSATION POLICY TABLE – CHAIRMAN AND NON-EXECUTIVE DIRECTORS The following table sets out details of the ongoing compensation elements for WPP’s Chairman and Non-Executive Directors. No element of pay is performance-linked.

Base fees Fees are reviewed at least every two years and consider the skills, experience and time An overall cap on all non-executive To reflect the skills and required to undertake the role, as well as fee levels in similarly-sized UK companies. fees, excluding consultancy fees, experience and time will apply consistent with the The Chairman and Non-Executive Directors receive a "base fee" in connection with their required to undertake prevailing and shareholder- appointment to the Board. the role. approved limit in the Articles of Association.

Additional fees Non-Executive Directors are eligible to receive additional fees in respect of serving as: An overall cap on all non-executive To reflect the additional time fees, excluding consultancy fees, –– Senior Independent Director required in any additional will apply consistent with the –– Chairman of a Board Committee duties for the Company. prevailing and shareholder- –– Member of a Board Committee approved limit in the Articles –– Consultancy fees in respect of other work that falls outside the remit of their role for of Association. the Company. Consultancy fees will be set on a discretionary basis, taking account of the nature of the role and time required.

Benefits and allowances The Company will reimburse the Chairman and Non-Executive Directors for all reasonable Benefits and allowances for the To enable the Chairman and and properly documented expenses incurred in performing their duties of office. Chairman will be set at a level that Non-Executive Directors to the Committee feels is required for The Company may provide additional allowance to facilitate the operation of the Board undertake their roles. the performance of the role. such as a travel allowance for attendance at international meetings. In the event that the reimbursement of these expenses gives rise to a personal tax liability for the Chairman or Non-Executive Director, the Company retains the discretion to meet this cost (including, where appropriate, costs in relation to tax advice and filing). While not currently offered, the Company retains the discretion to pay additional benefits to the Chairman including, but not limited to, use of car, office space and secretarial support.

OTHER CHAIRMAN AND NON- APPOINTMENTS TO THE BOARD PAYMENTS IN EXCEPTIONAL EXECUTIVE DIRECTOR POLICIES Letters of appointment will be consistent CIRCUMSTANCES LETTERS OF APPOINTMENT FOR THE with the current terms as set out in this In unforeseen and exceptional circumstances, CHAIRMAN AND NON-EXECUTIVE Annual Report. The Chairman and Non- the Committee retains the discretion to DIRECTORS Executive Directors are not eligible to make emergency payments which might Letters of appointment have a one- to receive any variable pay. Fees for any new not otherwise be covered by this policy. two-month notice period and there are Non-Executive Directors will be consistent The Committee will not use this power to no payments due on loss of office. with the operating policy at their time of exceed the recruitment policy limit, nor will appointment. In respect of the appointment awards be made in excess of the limits set of a new Chairman, the Committee has the out in the Directors’ Compensation Policy discretion to set fees considering a range table. An example of such an exceptional of factors including the profile and prior circumstance could be the untimely death experience of the candidate and external of a director, requiring another director to market data. take on an interim role until a permanent replacement is found.

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ANNUAL REPORT ON COMPENSATION

This section of the report sets out details The Committee members have no personal EXTERNAL ADVISORS of how the Directors' Compensation Policy financial interest (other than as a shareholder The Committee retains Willis Towers Watson was implemented in 2019. We start by as disclosed on page 135) in the matters (WTW) to act as independent advisors. setting out the details of the operation of to be decided by the Committee, potential They provide advice to the Compensation the Compensation Committee and then conflicts of interest arising from cross- Committee and work with management on present a summary of the 2019 Director directorships, or day-to-day involvement in matters related to our compensation policy compensation together with a summary running the Group’s businesses. The terms of and practices. They are a member of the of pay across the Group. reference for the Compensation Committee Remuneration Consultants Group and have are available on the Company’s website, and signed the code of conduct relating to the Payments have been made in accordance will be on display at the AGM, as set out in provision of advice in the UK. Considering with the previously approved Directors’ the Notice of AGM. this, and the level and nature of the service Compensation Policy, approved by received, the Committee remains satisfied shareholders at the 2017 AGM. The ADVISORS TO THE that the advice is objective and independent. information included in this section has COMPENSATION COMMITTEE WTW provides limited other services at a been audited where stated. The Compensation Committee regularly Group level and some of our operating consults with Group executives. The companies engage them as advisors at a We are presenting an updated Directors’ Committee invites certain individuals to local level. In 2019, WTW received fees of Compensation Policy for approval by attend meetings, including the Chief £218,746 in relation to the provision of advice shareholders at the 2020 AGM. Executive Officer (who is not present when to the Committee. The Committee receives matters relating to his own compensation or external legal advice, where required, to GOVERNANCE IN RELATION contracts are discussed and decided), the assist it in carrying out its duties. TO COMPENSATION Company Secretary, the Chief People Officer During 2019, the Compensation Committee and the Worldwide Compensation & Benefits CHANGES IN EXECUTIVE DIRECTORS met seven times on a formal basis, with Director. The latter two individuals provide a Paul Richardson will retire from the Company additional informal meetings held as needed perspective on information reviewed by the with effect from 1 May 2020. He will be to deal with ad hoc matters. A table of Board Committee and are a conduit for requests for succeeded by John Rogers, who joined the and Committee attendance can be found on information and analysis from the Company’s Company on 27 January 2020 as Chief page 100. external advisors. Financial Officer Designate.

STATEMENT OF SHAREHOLDER VOTING The result of the shareholder vote at the Company’s 2019 AGM in respect of the 2018 Compensation Committee Report is set out below along with the result of the vote on the Directors' Compensation Policy at the 2017 AGM: Voting outcome for 2018 Compensation Committee Report (At 2019 AGM)

VOTES FOR VOTES AGAINST VOTES CAST VOTES WITHHELD

Resolution Number % Number % Number Number To approve the 908,298,510 93.65% 61,541,791 6.35% 969,840,301 159,807 Compensation Committee Report

Voting outcome for 2017 Compensation Policy (At 2017 AGM, when the current policy was approved) VOTES FOR VOTES AGAINST VOTES CAST VOTES WITHHELD

Resolution Number % Number % Number Number To approve the 869,083,431 91.71 78,532,980 8.29 947,616,411 17,339,998 Compensation Policy

To learn more see wpp.com/about/ corporate-governance

126 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED) Single total figure of remuneration

Short-term incentive £000 Base Long-term Total annual salary Benefits Pension incentive4 remuneration £000 £000 £000 Cash Deferred £000 £000 Mark Read1 2019 975 35 171 805 537 71 2,594 2018 325 12 57 146 98 327 965 Paul Richardson2,3 2019 840 67 252 670 – 201 2,030 2018 808 64 243 192 128 690 2,125

1 Mark Read was appointed as CEO on 3 September 2018 and his 2018 salary and benefits reflect his time in role. 2 Paul Richardson’s base salary figure is denominated in US dollars other than his fee for his directorship of WPP plc which amounts to £100,000 which, per above, has been converted at an exchange rate of $1.2765 to £1. There has been no change in base salary over 2019 and the differences between the 2019 and 2018 values is due to a change in exchange rates. 3 Paul Richardson was not awarded the ESA portion of his bonus as, in accordance with the plan rules, it would lapse due to his retirement date. 4 None of the value of vested awards above is attributable to share price appreciation.

FIXED ELEMENTS OF REMUNERATION (AUDITED)

BASE SALARY Base salary As part of his contractual salary, Contractual received Paul Richardson received a fee of salary in 2019 £100,000 for his directorship of WPP plc. Effective date 000 000 Paul Richardson’s base salary has Mark Read 3 September 2018 £975 £975 not changed since 2013. Paul Richardson1 1 July 2013 $945 and £100 $1,073

1 The director’s fee for Paul Richardson has been converted into US dollars at a rate of $1.2765 to £1.

BENEFITS 2019 Benefits This allowance excludes the disclosable value 000 of expenses related directly to attendance Mark Read £35 at Board meetings that would be chargeable Paul Richardson $85 to UK income tax. The expenses for Mark Read were £2,442 (£1,666 in 2018) and for Paul Richardson were £7,626 (£7,625 in 2018).

PENSION Contractual 2019 pension Pension Mark Read was awarded an allowance of (% of base salary) £000 20% less employer’s national insurance Mark Read 20 171 contribution of 13.8% resulting in a net Paul Richardson 30 252 pension contribution of 17.6%.

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SHORT-TERM INCENTIVE (AUDITED)

2019 SHORT-TERM INCENTIVE PLAN OUTCOME (PERCENTAGES EXPRESSED RELATIVE TO BASE SALARY) In respect of the 2019 short-term incentive awards, 40% of Attributed Total 2019 Annual short-term Attributed to personal short-term the total award achieved by Mark Read will be delivered in incentive received to financial objectives objectives incentives the form of shares as an Executive Share Award (ESA) with % % % £000 a two-year deferral period. Paul Richardson, who retires Mark Read 138 78 60 1,341 on 1 May 2020, is not eligible to receive the ESA portion Paul Richardson 133 96 37 670 of his STIP. The STIP shown in the table for Paul Richardson represents only the cash element, 60% of the total. Cash bonuses and ESAs are subject to both malus and clawback provisions.

PERFORMANCE AGAINST 2019 FINANCIAL OBJECTIVES (70% OF THE AWARD) Performance against all financial objectives is calculated on a pro forma ("like-for-like") basis other than headline operating margin which is calculated on a constant currency basis. The key financial short-term incentive plan objectives for both of the Executive Directors provide a robust basis for assessing financial achievement.

Vesting2 Mark Read Paul Richardson As a % of As a % of As a % of As a % of Weight Threshold Target Stretch Actual1 stretch target stretch target Like for like headline PBT growth 1/3 -10.00% -5.00% 0.00% -8.50% 15% 30% 20% 30% Headline operating margin 1/3 -1.50% -1.00% 0.00% -1.00% 50% 100% 66% 100% Like for like growth in revenue less pass-through costs 1/3 -3.00% -1.75% -0.50% -1.30% 68% 136% 78% 119%

1 Performance measures are based on adjusted results for the Group for the year ended 31 December 2019, including Kantar for the period it was owned by the Group. 2 The different vesting percentages are due to the CEO bonus equating to 50% at target and CFO 66% at target.

PERFORMANCE AGAINST 2019 INDIVIDUAL STRATEGIC OBJECTIVES (30% OF THE AWARD) Maximum potential Award received Executive Director Personal measures 2019 (30%) Clarification of measures (% of base salary) (% of maximum) Mark Read Business simplification, – T ake opportunities to simplify the business with additional leadership team renewal, consolidation, disposals and restructuring where appropriate people, diversity – P ush forward with the refreshment and strengthening of business leadership. Further develop the culture and diversity of the workforce 75 80 Core asset disposals Sale of Kantar in accordance with guidance given to the Board. Optimise the financial terms of the deal and seek shareholder support for the terms agreed. Bring proposals for the distribution of proceeds to the Board and implement as approved Paul Richardson Working capital management Year-on-year improvement in overall Company leverage ratio as set out to investors driven by disposals, debt and NWC management Controls and Controls and compliance improvements 75 50 compliance improvement including the cascade down the organisation Transition to the new CFO Transitioning to the new finance structure including streamlining the team in preparation for the new CFO

Mark Read made substantial progress in 2019 in implementing the strategy he set out to shareholders in late 2018. The highlight was the disposal of the majority share in Kantar as well as the disposal of several other businesses that were not core to the Group. During the year numerous management changes were made to strengthen the leadership of the organisation, our client teams and creative capability. The Committee felt that Mark had produced a very strong performance in all areas.

Paul Richardson was judged to have achieved reasonable progress against his personal goals with good performance in improving the net working capital position and strengthening our accounting compliance processes. Paul has worked to ensure a smooth transition of responsibilities to the new Chief Financial Officer.

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SHORT-TERM INCENTIVE WEIGHTINGS AND MEASURES FOR 2020 The Committee has reviewed the performance objectives for 2020 to ensure continued alignment with Company strategy. In 2020, because of the uncertainty surrounding the impact on the business of Covid-19, while the focus will remain on revenue growth and profitability, additional measures will be adopted to measure the effectiveness of management in minimising any adverse impact on the Group. Further detail will be provided in next year’s Annual Report. The Committee is of the view that the targets for the STIP are commercially sensitive and it would be detrimental to the Company to disclose them in advance of, or during, the relevant performance period. To the extent targets are no longer commercially sensitive they will be disclosed at the end of the relevant performance period in that year’s Annual Report, as we have done in previous years.

LONG-TERM INCENTIVES (AUDITED)

VESTING OF 2015-2019 EPSP AWARDS Vesting of the 2015 EPSP awards was dependent on performance against three measures, all assessed over a five-year period:

–– WPP’s relative TSR, measured in common and local currency, against a custom group of WPP’s comparators (Dentsu, GfK, Havas, Interpublic, Ipsos, Nielsen, Omnicom and Publicis), weighted by their respective market capitalisation; –– Compound annual growth in headline EPS; and –– Average return on equity.

Over the five-year performance period: –– WPP’s TSR outperformed 40% of the weighted peer group on a common currency basis and 42% on a local currency basis. This resulted in zero vesting for that element. –– The compound annual growth rate in headline EPS was 1.24%. This achievement fell below the threshold performance level and resulted in zero vesting for this element. –– The Group delivered return on equity of 15.9%, resulting in vesting at 44.4% for that element.

In aggregate, WPP’s performance against the three measures resulted in an overall achievement of 14.8% of the maximum award.

Threshold Maximum Actual % of maximum Performance Measure Weighting % % % achieved

50% of 90% of Relative TSR (common currency) weighted peer weighted peer 40 0 1/3 group group outperformed outperformed Relative TSR (local currency) 42 0 EPS growth 1/3 7.0 14.0 1.24 0 Average ROE 1/3 10.0 14.0 15.9 44.4 Total vesting (% of maximum) 14.8

Additional Value of vested shares in respect 2015-2019 Number of of dividend Number of Share price EPSP awards shares awarded accrual shares vesting on vesting 000 Mark Read 65,910 2,097 11,845 £6.0000 £71 Paul Richardson1 37,970 1,217 6,832 $37.48095 $256

1 Paul Richardson's EPSP awards were granted in the form of ADRs.

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LONG-TERM INCENTIVES (AUDITED) CONTINUED 2019 EPSP AWARDS GRANTED In 2019, the Executive Directors were granted awards under the EPSP. Prior to grant, the Committee undertook extensive discussions in relation to the performance conditions to be used for future awards. The primary concern was that the current financial performance measures (EPS and ROE) and their associated performance goals, which were prescribed in the Compensation Policy, no longer aligned to current and forecast financial performance of the Company. The Committee felt that the performance measures would need to be amended in order for the EPSP to remain an effective method of incentivising and retaining management. Following consultation with key shareholders representing over a third of our issued share capital, it was decided that the awards would be made utilising relative TSR as the only performance condition. However, the Committee felt it essential that the awards have a ROIC underpin in order to ensure alignment to the underlying financial performance of the Company. The underpin condition requires that vesting of the awards is conditional on the average annual ROIC, over the five-year performance period, being at least 7.5%.

This change in performance measure is for the 2019 award only. The new Directors’ Compensation Policy includes a revised EPSP with a different structure and new performance measures that align to the current WPP strategy. If the policy is approved at the 2020 AGM, future EPSP awards will be made according to this policy.

The table below summarises the awards granted and the performance conditions against which participants will be measured.

Face value at Basis and level of award Award Number of date of grant1 Awards granted in 2019 (% of salary) over interests awarded 000 Mark Read 350 Ordinary shares 340,059 £3,412 Paul Richardson 300 ADRs 51,593 $3,232

Performance Measure Total Shareholder Return (TSR) Weight 100% Nature Relative to peers Performance zone (threshold to maximum) 50% to 90% of peer group outperformed Payout Below threshold: 0% of award vests Vesting is subject to an underpin defined as: Threshold: 15% of award vests average annual ROIC of 7.5% over the performance Maximum or above: 100% of award vests period. The Committee have discretion to Straight-line vesting between threshold determine whether the vesting level is a fair and maximum reflection of underlying performance.

1 Face value is calculated based on the five-day average share price preceding the date of award (£10.035 for ordinary shares and $62.653 for ADRS).

As in previous years, WPP’s TSR performance is compared to companies representing our most relevant, listed global competitors, weighted by market capitalisation. For 2019 EPSP awards, the comparator group comprised Dentsu, Interpublic, Ipsos, Nielsen, Omnicom and Publicis. TSR performance is calculated on a market capitalisation-weighted basis in both common and local currency (weighted equally). Using a dual basis ensures that the interests of both local and international investors are reflected in the performance measures.

EPSP MEASURES AND TARGETS FOR 2020 The Committee has proposed a new Directors’ Compensation Policy, including a restructured EPSP more closely aligned to WPP strategy. The effects of Covid-19 on our business are not yet clear but it will have a material adverse impact on our financial results. We are therefore taking the unusual step of not, at this stage, setting out the financial targets for the ROIC and Free Cash Flow measures that would be set using 2020 financial forecasts. However, assuming the policy is approved, the Compensation Committee will consult with shareholders on the proposed targets before any awards are granted later in the year, when the situation is clearer.

130 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

ALIGNING PAY AND PERFORMANCE As set out in the Directors’ Compensation Policy, the Committee’s objective is to align variable compensation with the key strategic priorities of WPP, maximising the dynamic between pay and performance.

This dynamic is contingent upon the Committee setting challenging targets each year. The following graph and table demonstrate the relationship between pay and performance over the last 10 years for the CEO. With respect to 2018, the pay for both the current and previous CEO are included, as separate sets of data.

HISTORICAL TSR PERFORMANCE1 Value of hypothetical £100 holding

WPP 500 FTSE 100

400

300

£239 200 £204

100

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: DataStream Return Index

2018 2018 2010 2011 2012 2013 2014 2015 2016 2017 MSS5 MR5 2019 CEO total compensation (£000)2 11,597 11,941 17,54 3 29,846 42,704 70,409 48,148 13,930 3,085 965 2,594 Year-on-year change in CEO total compensation (%) 61 3 47 70 43 65 (32) (71) (78) n/a 1696 Short-term incentive award against maximum (%) 95 77 62 82 72 86 60 0 0 30 55 Long-term incentive award against maximum (%) 83 46 86 87 100 100 100 73 33 33 15 Change in annual TSR (%)3 32 (13) 38 56 3 18 19 (20) (33) (33) 27 Change in five-year TSR (%)4 37 13 45 241 172 135 210 96 (1) (1) (4)

1 Growth in the value of a hypothetical £100 holding of WPP ordinary shares over 10 years against an equivalent holding in the FTSE 100 (the broad market equity index of which WPP is a constituent) based on one-month average of trading day values. Source: DataStream. 2 Calculated using the single figure methodology. 3 TSR calculated using a one-month trading day average, consistent with the data shown in the graph. 4 TSR calculated using a six-month averaging period, consistent with the calculation methodology under EPSP. 5 Sir Martin Sorrell (MSS) left the company on 14 April 2018; Mark Read (MR) was appointed as CEO from 3 September 2018. 6 Mark Read was appointed to the role of CEO in September 2018. The year-on-year change has been calculated based on the total compensation for this four‑month period.

WPP ANNUAL REPORT 2019 131 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION

RELATIVE IMPORTANCE OF SPEND ON PAY The following table sets out the percentage change in total staff costs, headcount, dividends and share buybacks.

2019 2018 % change Total staff costs (continuing operations) £7,090.6m £6,950.6m 2.0 Headcount – average over year 132,823 133,903 (0.8) Dividends and share buybacks £794.3m £954.5m (16.8)

RELATIVE CHANGE IN PAY FOR THE CHIEF EXECUTIVE OFFICER The following required table summarises the change in the CEO’s base salary, taxable benefits and annual bonus, compared to that of full-time employees within the Group. The current CEO was appointed in September 2018. In order to provide a meaningful comparison, his salary and benefits for 2018 have been adjusted such that they reflect the amounts which would have been paid if he had been in role for the full year. He received no salary increase or increase to his benefits allowance.

Base UK taxable Annual salary benefits bonus % % % Chief Executive Officer 0 0 4503 All Employees 1,2 0.8 5.9 (2.4)

1 The All Employees numbers for the change in base salary, taxable benefits and annual bonus have been calculated based on the annual average amount received. 2 Considering the worldwide structure and size of the Group and given the need to calculate benefits on the basis that an individual is resident in the UK for tax purposes, collating data on all employees was not practicable. As a result, the population for taxable benefits consists of UK employees only. 3 Mark Read was appointed to the role of CEO in September 2018. The 2018 annual bonus used to calculate the change in annual bonus for the CEO pertains to this four-month period only.

CEO PAY RATIO The ratios shown in the table below compare the total remuneration of the CEO (as shown in the single figure table on page 127) to the remuneration of the median UK employee and those at the lower and upper quartile.

Year Methodology used 25th percentile pay ratio 50th percentile pay ratio 75th percentile pay ratio 2019 Total remuneration Option B 1:79 1:55 1:34

Given the complexity of WPP and the number of payrolls used across the UK Group, Option B was the most appropriate methodology to use to determine the CEO pay ratio. We believe this approach provides accurate information and representation of the ratios. The latest data collected as part of gender pay reporting was used, with a snapshot date of 5 April 2019. The ratio has been computed taking into account the pay and benefits of over 14,000 UK employees, other than the role of the CEO. Where an employee works part-time, fixed pay, benefits, and any variable pay were adjusted, where appropriate, to reflect full-time equivalent remuneration. The 25th, 50th and 75th percentile employees were determined based on this adjusted data. Total remuneration for 2019 was calculated using single figure table methodology for these employees in order to provide a meaningful comparison with the CEO. We are satisfied that the median pay ratio is consistent with the remuneration policies for our UK workforce taken as a whole and our objective of delivering market competitive pay for each role.

The salary and total pay and benefits for the 25th, 50th and 75th percentile employees are shown in the table below: 75th percentile Year Methodology used 25th percentile pay ratio 50th percentile pay ratio pay ratio Salary Option B £31,000 £44,739 £70,000 2019 Total pay and benefits Option B £32,636 £46,975 £77,416

The pay ratio reflects how the structure and approach to remuneration changes with increased seniority and accountability within the Group and is therefore consistent with pay, reward and progression policies. The CEO’s pay is significantly weighted towards performance-related pay with a focus on aligning with long-term performance and the interests of shareholders. The ratio will therefore fluctuate depending on the financial performance of the Group and share price movements.

132 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

NON-EXECUTIVE DIRECTORS’ FEES The fees due to Non-Executive Directors were reviewed and increased in 2018. The Chairman's fee was reviewed and increased effective July 2019. The fees are shown in the table below: £000 Chairman 525 Non-Executive Director 85 Senior Independent Director 30 Chairmanship of Audit or Compensation Committee 40 Chairmanship of Nomination and Governance Committee 15 Chairmanship of Sustainability Committee1 15 Member of Audit or Compensation Committee 20 Member of Nomination and Governance Committee 10 Member of Sustainability Committee 10

1 The Sustainability Committee is currently co-chaired. Each Chair receives a £15,000 fee.

NON-EXECUTIVE DIRECTORS’ TOTAL COMPENSATION RECEIVED (AUDITED) The single figure table below details fee payments received by the Non-Executive Directors while they held a position on the Board. During both 2018 and 2019, the Company met the cost (including national insurance and income tax, where relevant) of expenses incurred by the Non-Executive Directors in performing their duties of office, in accordance with the policy set out above.

In 2019, the disclosable value of the expenses that would be chargeable to UK income tax totalled £80,304 (including £35,820 of national insurance and income tax, where relevant).

Fees £000 2019 2018 Roberto Quarta 500 475 Jacques Aigrain 145 138 Tarek Farahat 105 98 Sir John Hood 125 118 Ruigang Li1 44 88 Daniela Riccardi 95 88 Cindy Rose2 79 n/a Nicole Seligman 145 130 Sally Susman 98 88 Sol Trujillo 105 98 Keith Weed3 17 n/a Jasmine Whitbread4 37 n/a

1 Ruigang Li retired from the Board on 12 June 2019. 2 Cindy Rose was appointed to the Board on 1 April 2019. 3 Keith Weed was appointed to the Board on 1 November 2019. 4 Jasmine Whitbread was appointed to the Board on the 1 September 2019.

WPP ANNUAL REPORT 2019 133 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION

PAST DIRECTORS Since his retirement from the Board, Timothy Shriver has been appointed as a consultant advising the Company on certain client relationships. He received a payment of £155,267 in 2019 for his consultancy services.

Sir Martin Sorrell left the Company in April 2018. His outstanding share awards granted under the Executive Performance Share Plan (EPSP) have been prorated to reflect his service period and will vest to the extent that performance conditions are achieved. The table below sets out details of the 2015 award that vested on 12 March 2020 based on performance achieved (see page 129 for detail).

Additional share Value of vested Number of in respect of Number of Share price 2015-2019 EPSP Plan shares awarded dividend accrual shares vesting on vesting awards 000 Sir Martin Sorrell 2015 EPSP 738,267 15,270 86,243 £6.0000 £517

EXECUTIVE DIRECTORS’ INTERESTS (AUDITED) Executive Directors’ interests in the Company’s ordinary share capital are shown in the following table. Other than as disclosed in this table, no Executive Director had any interest in any contract of significance with the Group during the year. Each Executive Director has a technical interest as an employee and potential beneficiary in shares in the Company held under the Employee Share Ownership Plan Trusts (ESOPs). More specifically, the Executive Directors have potential interests in shares related to the outstanding awards under the EPSP and outstanding ESAs. As at 31 December 2019, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 9,219,837 shares in the Company (14,820,994 in 2018).

Shares without Shares with Total performance performance Total beneficial conditions conditions unvested Director interests (unvested)1,2 (unvested)3,4 shares Mark Read At 31 December 2019 196,789 193,388 967,728 1,161,116 At 29 April 2020 251,643 155,071 901,818 1,056,889 Paul Richardson At 31 December 2019 1,068,240 14,235 1,133,300 1,147,535 At 29 April 2020 1,080,145 14,235 943,450 957,685

1 For Mark Read shares due pursuant to the 2017 Performance Share and 2018 Executive Share awards, 2017 Leaders awards and 2018 Retention awards and for Paul Richardson, the 2018 Executive Share award. Full details of these awards can be found on pages 135 and 136. Additional dividend shares will be due on vesting. 2 As noted in footnote 1 above, less 2017 Performance Share award, which vested on 10 March 2020 (full details can be found on page 135). 3 Maximum number of shares due on vesting pursuant to the outstanding EPSP awards, full details of which can be found on page 136. Additional dividend shares will be due on vesting. 4 As noted in footnote 3 above, less the maximum due under the 2015 EPSP award, which vested on 12 March 2020 (full details can be found on page 129).

SHARE OWNERSHIP REQUIREMENTS As detailed in the Directors’ Compensation Policy, the Executive Directors are required to achieve a minimum level of share ownership of WPP shares. The CEO and Group Finance Director are required to hold shares to the value of 600% and 300% of base salary respectively.

As at 31 December 2019, the Chief Executive Officer held shares to the value of 215% of his base salary. He has seven years from the date appointed to the CEO role in which to reach required level. At the same date Paul Richardson significantly exceeded his requirement and held shares to the value of 1,356% of his base salary. He will be required to maintain his share ownership requirement of 300% of base salary in the year following his retirement and 150% of base salary for the second year.

134 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

NON-EXECUTIVE DIRECTORS’ INTERESTS (AUDITED) Non-Executive Directors’ interests in the Company’s ordinary share capital are shown in the following table. Except as disclosed in this table, no Non-Executive Director had any interest in any contract of significance with the Group during the year.

Total interests at Total interests at Non-Executive Director 31 December 2019 29 April 2020 Roberto Quarta 87,500 87,500 Jacques Aigrain 34,000 34,000 Tarek Farahat 3,775 3,775 Sir John Hood 3,000 3,000 Ruigang Li1 4,000 n/a Daniela Riccardi 4,100 4,100 Cindy Rose2 8,000 8,000 Nicole Seligman 8,750 8,750 Sally Susman 5,000 5,000 Sol Trujillo 10,000 10,000 Keith Weed3 2,161 2,161 Jasmine Whitbread4 – 3,330

1 Ruigang Li retired from the Board on 12 June 2019. The information disclosed reflects his total interest at this date. 2 Cindy Rose was appointed to the Board on 1 April 2019. 3 Keith Weed was appointed to the Board on 1 November 2019. 4 Jasmine Whitbread was appointed to the Board on the 1 September 2019.

OUTSTANDING SHARE-BASED AWARDS EXECUTIVE SHARE AWARDS (ESAs) HELD BY EXECUTIVE DIRECTORS All Executive Share Awards (ESA) or Performance Share Awards (PSA) granted under the Restricted Stock Plan and its successor, the WPP Stock Plan 2018, are made on the basis of satisfaction of previous performance conditions and are subject to continuous employment until the vesting date. Mark Read received ESA and PSA awards prior to his appointment as Executive Director. Unless otherwise noted, awards are made in the form of WPP ordinary shares.

Additional No. of shares Share/ADR shares/ Face value on granted in Shares/ADR Value on price on ADRs grant date lieu of Total shares price on vesting Grant date grant date granted2 0003 dividends vesting Vesting date vesting 000 Mark Read 2016 PSA 06.06.17 £17.2050 25,573 £440 2,553 28,126 10.03.19 £8.5458 £240 2017 PSA 12.06.18 £12.3800 38,317 £474 – – 10.03.20 – – 2018 ESA 30.05.19 £9.4840 62,834 £596 – – 06.03.21 – – Paul Richardson1 2016 ESA 06.06.17 $110.7600 9,280 $1,028 933 10,213 06.03.19 $57.3447 $586 2018 ESA 30.05.19 $60.06 2,847 $171 – – 06.03.21 – –

1 Paul Richardson’s ESAs were granted in respect of ADRs. 2 Dividend shares will be due on these awards. 3 Face value has been calculated using the average closing share price for the trading day preceding the date of grant (as set out in the table).

WPP ANNUAL REPORT 2019 135 CORPORATE GOVERNANCE COMPENSATION COMMITTEE REPORT ANNUAL REPORT ON COMPENSATION

OUTSTANDING SHARE-BASED AWARDS CONTINUED Mark Read received awards prior to his appointment as CEO under the management incentive plans. In addition, he received awards on his appointment as joint-COO in April 2018. While the Board decided on the appointment of the next CEO, a special one-off award was made recognising the importance and scale of the additional responsibilities that were being undertaken. Each award is subject to continuous employment and malus and clawback and was made under the Restricted Stock Plan and the WPP Stock Plan 2018.

Additional No. of shares Share/ADR shares/ Face value on granted in Shares/ADR Grant price on ADRs grant date lieu of Total shares price on Value on date grant date granted2 0003 dividends vesting Vesting date vesting vesting 000 Mark Read Leaders 2016 28.11.16 £17.0550 8,795 £150 1,477 10,272 15.11.19 £9.8378 £101 Leaders 2017 04.12.17 £13.0850 11,463 £150 – – 15.11.20 – – Special award1 12.06.18 £12.3800 40,387 £500 2,300 42,687 01.05.19 £9.6800 £413 01.05.20 Special and award1 12.06.18 £12.3800 80,774 £1,000 – – 01.05.21 – –

1 The first tranche of the one-off special award vested on 1 May 2019. The remaining two tranches will vest in equal parts on 1 May 2020 and 1 May 2021. 2 Dividend shares will be due on these awards. 3 Face value has been calculated using the average closing share price for the trading day preceding the date of grant (as set out in the table).

LONG-TERM INCENTIVE PLANS – EXECUTIVE PERFORMANCE SHARE PLAN The following table summarises all of the awards outstanding under the Executive Performance Share Plan.

During 2019

Maximum Maximum number number of nil of nil cost options Shares/ADR cost options over shares/ADRs price on grant over shares/ Options Additional Options at 31 December Grant date Performance period date ADRs awarded2 vested/(lapsed) dividend shares exercised 2019 Mark Read 09.06.15 01.01.15-31.12.19 £15.1720 65,910 – – – 65,910 28.11.16 01.01.16-31.12.20 £17.0520 58,644 – – – 58,644 04.12.17 01.01.17-31.12.21 £12.9110 106,498 – – – 106,498 06.12.18 01.01.18-31.12.22 £8.6040 396,617 – – – 396,617 24.09.19 01.01.19-31.12.23 £10.0350 340,059 – – – 340,059 Paul Richardson1 09.06.15 01.01.15-31.12.19 $115.8800 37,970 – – – 37,970 28.11.16 01.01.16-31.12.20 $105.9309 41,536 – – – 41,536 04.12.17 01.01.17-31.12.21 $86.9138 36,933 – – – 36,933 06.12.18 01.01.18-31.12.22 $55.2631 58,628 – – – 58,628 24.09.19 01.01.19-31.12.23 $62.6530 51,593 – – – 51,593

1 Paul Richardson’s EPSP awards were granted in respect of ADRs. 2 Dividend shares will be due on these awards.

Full details of the 2019 EPSP award, including performance measures and targets, can be found on page 130.

136 WPP ANNUAL REPORT 2019 COMPENSATION COMMITTEE REPORT CORPORATE GOVERNANCE

IMPLEMENTATION OF REWARD POLICY FOR MANAGEMENT OUTSIDE THE BOARD As part of its review of the Directors’ Compensation Policy during 2019, the Committee took into consideration the compensation arrangements of the wider workforce to ensure that the new policy was aligned and reflective of the terms offered to other employees. The Committee places significant value on the views of employees and has established appropriate mechanisms to capture them.

The Company uses share-based compensation programmes to incentivise and retain employees, recruit new talent and encourage a strong ownership culture among employees. The use of the core share plans in 2019 is described below.

WPP STOCK PLAN 2018 (WSP) The WPP Leaders, Partners and High Potential programme made awards under the WSP to about 1,400 of our key executives in 2019. Awards vest three years after grant, provided the participant is still employed within the Group. In addition, senior executives have part of their annual bonus paid in the form of executive or performance share awards that vest two years after grant.

The Executive Directors do not participate in any aspect of the WSP except for the deferred share bonus award. All awards granted under the WSP are subject to malus and clawback conditions.

WPP SHARE OPTION PLAN 2015 During 2019, the WPP Share Option Plan 2015 was used to make awards to over 38,000 employees. By 31 December 2019, options under this plan, and its predecessor, the Worldwide Ownership Plan, had been granted to approximately 187,000 employees over 95 million shares since March 1997.

While the Share Option Plan provides the authority to make executive option awards, in addition to all employee awards, no awards were granted in 2019. The Executive Directors do not participate in this plan.

SHARE INCENTIVE DILUTION FOR 2009 TO 2019 The share incentive dilution level, measured on a 10-year rolling basis, was at 3.3% at 31 December 2019 (2018: 3.4%). It is intended that awards under all plans, other than share options, will all be satisfied with purchased shares held either in the ESOPs or in treasury.

Sir John Hood Chairman of the Compensation Committee on behalf of the Board of Directors of WPP plc 29 April 2020

WPP ANNUAL REPORT 2019 137 FINANCIAL STATEMENTS

138 WPP ANNUAL REPORT 2019

FINANCIAL STATEMENTS

Accounting policies 140

Consolidated financial statements 147

Notes to the consolidated financial statements 152

Company financial statements 182

Notes to the Company financial statements 185

Independent auditor's report 187

WPP ANNUAL REPORT 2019 139 FINANCIAL STATEMENTS ACCOUNTING POLICIES

ACCOUNTING POLICIES

The consolidated financial statements of WPP plc and its subsidiaries The right-of-use asset and lease liability recorded on the consolidated (the Group) for the year ended 31 December 2019 have been prepared in balance sheet as of 1 January 2019 were £1,895.1 million and £2,326.2 million, accordance with International Financial Reporting Standards (IFRS) as adopted respectively. There was a reduction in other creditors of £233.5 million and by the European Union as they apply to the financial statements of the Group property provisions of £68.7 million with regard to amounts related to for the year ended 31 December 2019. property leases, including deferred rent and tenant improvement allowances, which are now recognised in the right-of-use asset. These movements resulted The Group’s financial statements have also been prepared in accordance in a decrease to retained earnings of £128.9 million and the recognition of a with International Financial Reporting Standards as issued by the International deferred tax asset of £27.8 million on this movement. Accounting Standards Board. For the year ended 31 December 2019, depreciation of the right-of-use asset BASIS OF PREPARATION and recognition of interest on the lease liability in the consolidated income The consolidated financial statements have been prepared under the historical statement replaced amounts recognised as rent expense under IAS 17. cost convention, except for the revaluation of certain financial instruments and The implementation of IFRS 16 on 1 January 2019 resulted in an increase to held for sale assets. The financial statements have been prepared using the reported and headline operating profit (as defined in note 32) of £61.0 million going concern basis of accounting. The principal accounting policies are set and a subsequent increase to operating profit margin of 0.6 margin points out below. along with increased interest and a decrease to all earnings per share measures of 1.8p. BASIS OF CONSOLIDATION The consolidated financial statements include the results of the Company The following table reconciles the opening balance for the lease liabilities and all its subsidiary undertakings made up to the same accounting date. as at 1 January 2019 based upon the operating lease obligations as at All intra-Group balances, transactions, income and expenses are eliminated 31 December 2018: in full on consolidation. The results of subsidiary undertakings acquired or disposed of during the period are included or excluded from the consolidated £m income statement from the effective date of acquisition or disposal. Operating lease commitments at 31 December 2018 3,628.2 Short-term and low-value leases not included in lease liabilities (73.8) NEW IFRS ACCOUNTING PRONOUNCEMENTS In the current year, the following Standards and Interpretations became Extension options reasonably certain to be exercised 115.1 effective: Signed leases not yet commenced (598.1) –– IFRS 16 Leases; and Gross lease liabilities at 1 January 2019 3,071.4 –– IFRIC 23 Uncertainty over Income Tax Treatments. Effect of discounting (745.2) IMPACT OF THE ADOPTION OF IFRS 16 LEASES Lease liabilities at 1 January 2019 2,326.2 IFRS 16 is effective from 1 January 2019. The standard eliminates the The weighted average discount rate was 5.4% at 1 January 2019. classification of leases as either operating or finance leases and introduces a single accounting model. Lessees are required to recognise a right-of-use IMPACT OF THE ADOPTION OF IFRIC 23 UNCERTAINTY OVER asset and related lease liability for their operating leases and show INCOME TAX TREATMENTS depreciation of leased assets and interest on lease liabilities separately in the IFRIC 23 clarifies the accounting for uncertainties in income tax and is effective income statement. IFRS 16 requires the Group to recognise substantially all from 1 January 2019. There has been no impact to our financial statements as of its operating leases on the balance sheet. a result of the adoption of IFRIC 23. The Group adopted IFRS 16 effective 1 January 2019 on a modified At the date of authorisation of these financial statements, the following retrospective basis and applied the standard retrospectively with the amendments to standards, which have not been applied in these financial cumulative effect of initially applying the standard recognised at the date of statements, were in issue but not yet effective: initial application as an adjustment to retained earnings. Accordingly, prior –– Impact of Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 year financial information has not been restated and will continue to be and IFRS 7). reported under IAS 17 Leases. The right-of-use asset and lease liability have initially been measured at the present value of the remaining lease payments, IMPACT OF INTEREST RATE BENCHMARK REFORM with the right-of-use asset being subject to certain adjustments. For certain The amendments issued by the IASB, Interest Rate Benchmark Reform leases the right-of-use asset was measured as if the standard had been applied (Amendments to IFRS 9, IAS 39 and IFRS 7), are mandatory and are effective from from the lease commencement date and for others the right-of-use asset was 1 January 2020. They provide relief on specific aspects of pre-replacement set equal to the lease liability. issues that impact hedge accounting, whereby entities applying hedge accounting requirements will be able to assume that the interest rate When applying IFRS 16, the Group has applied the following practical benchmark on which the hedged cash flows and cash flows of the hedging expedients on transition date: instrument are based are not altered as a result of Interest Rate Benchmark –– Reliance on the previous identification of a lease (as provided by IAS 17) Reform. The Group does not consider that these amendments will have a for all contracts that existed on the date of initial application; significant impact on the financial statements as they provide relief for the –– Reliance on previous assessments on whether leases are onerous instead possible effects of the uncertainty arising from interest rate benchmark reform. of performing an impairment review; –– Exclusion of initial direct costs from the measurement of the right-of-use asset at the date of initial application; –– The accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases; and –– The use of hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.

140 WPP ANNUAL REPORT 2019 ACCOUNTING POLICIES FINANCIAL STATEMENTS

GOODWILL AND OTHER INTANGIBLE ASSETS PROPERTY, PLANT AND EQUIPMENT Intangible assets comprise goodwill, certain acquired separable corporate Property, plant and equipment are shown at cost less accumulated brand names, acquired customer relationships, acquired proprietary tools depreciation and any provision for impairment with the exception of freehold and capitalised computer software not integral to a related item of hardware. land which is not depreciated. The Group assesses the carrying value of its property, plant and equipment to determine if any impairment has occurred. Goodwill represents the excess of fair value attributed to investments in Where this indicates that an asset may be impaired, the Group applies the businesses or subsidiary undertakings over the fair value of the underlying requirements of IAS 36 Impairment of Assets in assessing the carrying amount net assets, including intangible assets, at the date of their acquisition. of the asset. This process includes comparing its recoverable amount with its carrying value. Depreciation is provided at rates calculated to write off the Goodwill impairment reviews are undertaken annually or more frequently cost less estimated residual value of each asset on a straight-line basis over if events or changes in circumstances indicate a potential impairment. its estimated useful life, as follows: The carrying value of goodwill is compared to the recoverable amount, –– Freehold buildings – 50 years. defined as the higher of fair value less costs to sell and value in use. The net –– Leasehold land and buildings – over the term of the lease or life of the present value of future cash flows is derived from the underlying assets using asset, if shorter. a projection period of up to five years for each cash-generating unit. After the –– Fixtures, fittings and equipment – 3-10 years. projection period, a steady growth rate representing an appropriate long-term –– Computer equipment – 3-5 years. growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed. INTERESTS IN ASSOCIATES AND JOINT VENTURES An associate is an entity over which the Group has significant influence. Corporate brand names, customer relationships and proprietary tools In certain circumstances, significant influence may be represented by factors acquired as part of acquisitions of businesses are capitalised separately from other than ownership and voting rights, such as representation on the Board goodwill as intangible assets if their value can be measured reliably on initial of Directors. recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group. The Group’s share of the profits less losses of associate undertakings net of tax, interest and non-controlling interests is included in the consolidated Certain corporate brands of the Group are considered to have an indefinite income statement and the Group’s share of net assets is shown within economic life because of the institutional nature of the corporate brand interests in associates in the consolidated balance sheet. The Group’s share names, their proven ability to maintain market leadership and profitable of the profits less losses and net assets is based on current information operations over long periods of time and the Group’s commitment to develop produced by the undertakings, adjusted to conform with the accounting and enhance their value. The carrying value of these intangible assets is policies of the Group. reviewed at least annually for impairment and adjusted to the recoverable amount if required. The Group assesses the carrying value of its associate undertakings to determine if any impairment has occurred. Where this indicates that an Amortisation is provided at rates calculated to write off the cost less estimated investment may be impaired, the Group applies the requirements of IAS 36 residual value of each asset on a straight-line basis over its estimated useful life in assessing the carrying amount of the investment. This process includes as follows: comparing its recoverable amount with its carrying value. The recoverable –– Brand names (with finite lives) – 10-20 years. amount is defined as the higher of fair value less costs to sell and value in use. –– Customer-related intangibles – 3-10 years. –– Other proprietary tools – 3-10 years. The Group accounts for joint venture investments under the equity method –– Other (including capitalised computer software) – 3-5 years. which is consistent with the Group’s treatment of associates.

CONTINGENT CONSIDERATION OTHER INVESTMENTS Contingent consideration is accounted for in accordance with IFRS 3 Business Certain equity investments are designated as either fair value through other Combinations. Contingent consideration only applies to situations where comprehensive income or fair value through profit or loss. Movements in contingent payments are not dependent on future employment of vendors fair value through profit or loss are recorded in the consolidated income and any such payments are expensed when they relate to future employment. statement within revaluation of financial instruments.

Future anticipated payments to vendors in respect of contingent The Group generally elects to classify equity investments as fair value through consideration (earnout agreements) are initially recorded at fair value which other comprehensive income where the Group forms a strategic partnership is the present value of the expected cash outflows of the obligations. The with the investee. obligations are dependent on the future financial performance of the interests acquired (typically over a four- to five-year period following the year of acquisition) and assume the operating companies improve profits in line with Directors’ estimates. The Directors derive their estimates from internal business plans together with financial due diligence performed in connection with the acquisition.

Subsequent adjustments to the fair value are recorded in the consolidated income statement within revaluation of financial instruments.

WPP ANNUAL REPORT 2019 141 FINANCIAL STATEMENTS ACCOUNTING POLICIES

NON-CURRENT ASSETS HELD FOR SALE AND Under IFRS 9 Financial Instruments, the expected credit losses are measured DISCONTINUED OPERATIONS as the difference between the asset’s gross carrying amount and the present Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, value of estimated future cash flows discounted at the financial asset’s original where certain conditions are met, an asset or disposal group that is for sale effective interest rate. Given the short-term nature of the Group’s trade should be recognised as "held for sale". An entity should classify a disposal receivables, work in progress and accrued income, which are mainly due from group as held for sale if the carrying amount will be recovered principally large national or multinational companies, the Group assessment of expected through a sale transaction rather than through continuing use. For this to be credit losses includes provisions for specific clients and receivables where the the case, the disposal group must be available for immediate sale in its present contractual cash flow is deemed at risk. Additional provisions are made based condition subject only to terms that are usual and customary for sales of such on the assessment of recoverability of aged receivables, where the following assets and its sale must be highly probable. Such assets are measured at the criteria are met: lower of carrying amount and fair value less costs to sell, and are not –– 100% of the asset aged over one year; depreciated or amortised, excluding certain assets that are carried at fair value –– 50% of the asset aged between 180 days and one year; and under IFRS 5. Furthermore, when an associate is classified as held for sale, –– sufficient evidence of recoverability is not evident. equity accounting ceases. Estimated future cash flows represent expectations as at 31 December 2019 and A discontinued operation is a component of the entity that has been disposed do not consider the impact of the emergence and spread of the Covid-19 virus. of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated Further details on provisions for bad and doubtful debts are provided in plan to dispose of such a line of business or area of operations, or is a note 18. subsidiary acquired exclusively with a view to resale. The profit or loss from a discontinued operation is shown as a single amount on the face of the income FOREIGN CURRENCY AND INTEREST RATE HEDGING statement and the comparatives and related notes restated accordingly. This The Group’s policy on interest rate and foreign exchange rate management represents total post-tax profit of the disposal group for the whole of the sets out the instruments and methods available to hedge interest and currency financial year including any post-tax gain or loss on the measurement of fair risk exposures and the control procedures in place to ensure effectiveness. value less costs to sell, as well as the post-tax loss on sale of the disposal group. Assets and liabilities classified as held for sale are shown as a separate The Group uses derivative financial instruments to reduce exposure to foreign line on the balance sheet. exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes. ACCRUED AND DEFERRED INCOME Accrued income is a contract asset and is recognised when a performance Derivatives are initially recognised at fair value at the date a derivative obligation has been satisfied but has not yet been billed. Contract assets are contract is entered into and are subsequently remeasured to their fair value transferred to receivables when the right to consideration is unconditional at each balance sheet date. The resulting gain or loss is recognised in profit or and billed per the terms of the contractual agreement. loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss In certain cases, payments are received from customers or amounts are billed depends on the nature of the hedge relationship. with an unconditional right to receive consideration prior to satisfaction of performance obligations and recognised as deferred income. These balances At the inception of the hedge relationship, the entity documents the are considered contract liabilities and are typically related to prepayments for relationship between the hedging instrument and hedged item, along with third-party expenses that are incurred shortly after billing. its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing TRADE RECEIVABLES AND WORK IN PROGRESS basis, the Group documents whether the hedging instrument that is used in Trade receivables are stated net of provisions for bad and doubtful debts. a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item. Work in progress includes outlays incurred on behalf of clients, including production costs, and other third-party costs that have not yet been billed Note 27 contains details of the fair values of the derivative instruments used and are considered receivables under IFRS 15 Revenue from Contracts for hedging purposes. with Customers. Changes in the fair value of derivatives that are designated and qualify as EXPECTED CREDIT LOSSES fair value hedges are recorded in profit or loss immediately, together with The Group has applied the simplified approach to measuring expected credit any changes in the fair value of the hedged item that is attributable to the losses, as permitted by IFRS 9. Therefore the Group does not track changes hedged risk. in credit risk, but recognises a loss allowance based on the financial asset's lifetime expected credit loss. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow or net investment hedges is recognised in other comprehensive income and deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

142 WPP ANNUAL REPORT 2019 ACCOUNTING POLICIES FINANCIAL STATEMENTS

Hedge accounting is discontinued when the hedging instrument expires or Revenue is recognised when a performance obligation is satisfied, in is sold, terminated, exercised, or no longer qualifies for hedge accounting. accordance with the terms of the contractual arrangement. Typically, At that time, any cumulative gain or loss on the hedging instrument recognised performance obligations are satisfied over time as services are rendered. in equity is retained in equity until the forecast transaction occurs. If a hedged Revenue recognised over time is based on the proportion of the level of transaction is no longer expected to occur, the net cumulative gain or loss service performed. Either an input method or an output method, depending recognised in equity is transferred to net profit or loss for the period. on the particular arrangement, is used to measure progress for each performance obligation. For most fee arrangements, costs incurred are Derivatives embedded in other financial instruments or other host contracts used as an objective input measure of performance. The primary input of are treated as separate derivatives when their risks and characteristics are substantially all work performed under these arrangements is labour. There not closely related to those of host contracts and the host contracts are not is normally a direct relationship between costs incurred and the proportion carried at fair value with unrealised gains or losses reported in the of the contract performed to date. In other circumstances relevant output consolidated income statement. measures, such as the achievement of any project milestones stipulated in the contract, are used to assess proportional performance. LIABILITIES IN RESPECT OF OPTION AGREEMENTS Option agreements that allow the Group’s equity partners to require the For our retainer arrangements, we have a stand-ready obligation to perform Group to purchase a non-controlling interest are treated as derivatives over services on an ongoing basis over the life of the contract. The scope of these equity instruments and are recorded in the consolidated balance sheet initially arrangements are broad and generally are not reconcilable to another input or at the present value of the redemption amount in accordance with IAS 32 output criteria. In these instances, revenue is recognised using a time-based Financial Instruments: Presentation and subsequently measured at fair value in method resulting in straight-line revenue recognition. accordance with IFRS 9 Financial Instruments. The movement in the fair value is recognised as income or expense within revaluation of financial instruments The amount of revenue recognised depends on whether we act as an agent in the consolidated income statement. or as a principal. Certain arrangements with our clients are such that our responsibility is to arrange for a third party to provide a specified good or DERECOGNITION OF FINANCIAL LIABILITIES service to the client. In these cases we are acting as an agent as we do not In accordance with IFRS 9 Financial Instruments, a financial liability of the control the relevant good or service before it is transferred to the client. When Group is only released to the consolidated income statement when the we act as an agent, the revenue recorded is the net amount retained. Costs underlying legal obligation is extinguished. incurred with external suppliers (such as production costs and media suppliers) are excluded from revenue and recorded as work in progress until billed. DEBT Interest-bearing debt is recorded at the proceeds received, net of direct The Group acts as principal when we control the specified good or service issue costs. prior to transfer. When the Group acts as a principal (such as when supplying in-house production services, events and branding), the revenue recorded is BORROWING COSTS the gross amount billed. Billings related to out-of-pocket costs such as travel Finance costs of borrowing are recognised in the consolidated income are also recognised at the gross amount billed with a corresponding amount statement over the term of those borrowings. recorded as an expense.

REVENUE RECOGNITION Further details on revenue recognition are detailed by sector below: The Group is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of GLOBAL INTEGRATED AGENCIES communications, experience, commerce and technology services. Contracts Revenue is typically derived from integrated product offerings including media often involve multiple agencies offering different services in different placements and creative services. Revenue may consist of various arrangements countries. As such, the terms of local, regional and global contracts can vary to involving commissions, fees, incentive-based revenue or a combination of the meet client needs and regulatory requirements. Consistent with the industry, three, as agreed upon with each client. Revenue for commissions on purchased contracts are typically short-term in nature and tend to be cancellable by media is typically recognised at the point in time the media is run. either party with 90 days' notice. The Group is generally entitled to payment for work performed to date. The Group receives volume rebates from certain suppliers for transactions entered into on behalf of clients that, based on the terms of the relevant The Group is generally paid in arrears for its services. Invoices are typically contracts and local law, are either remitted to clients or retained by the Group. payable within 30 to 60 days. Revenue comprises commissions and fees If amounts are passed on to clients they are recorded as liabilities until settled earned in respect of amounts billed and is stated exclusive of VAT, sales taxes or, if retained by the Group, are recorded as revenue when earned. and trade discounts. Pass-through costs comprise fees paid to external suppliers when they are engaged to perform part or all of a specific project Variable incentive-based revenue typically comprises both quantitative and and are charged directly to clients, predominantly media and data collection qualitative elements. Incentive compensation is estimated using the most costs. Costs to obtain a contract are typically expensed as incurred as the likely amount and is included in revenue up to the amount that is highly contracts are generally short-term in nature. probable not to result in a significant reversal of cumulative revenue recognised. The Group recognises incentive revenue as the related In most instances, promised services in a contract are not considered distinct performance obligation is satisfied. or represent a series of services that are substantially the same with the same pattern of transfer to the customer and, as such, are accounted for as a single PUBLIC RELATIONS AND SPECIALIST AGENCIES performance obligation. However, where there are contracts with services Revenue for these services is typically derived from retainer fees and fees for that are capable of being distinct, are distinct within the context of the services to be performed subject to specific agreement. Most revenue under contract, and are accounted for as separate performance obligations, these arrangements is earned over time, in accordance with the terms of the revenue is allocated to each of the performance obligations based on contractual arrangement. relative standalone selling prices.

WPP ANNUAL REPORT 2019 143 FINANCIAL STATEMENTS ACCOUNTING POLICIES

DISCONTINUED OPERATIONS (DATA INVESTMENT MANAGEMENT) Deferred tax liabilities are recognised for taxable temporary differences arising Revenue for market research services is typically recognised over time based on investments in subsidiaries and associates, and interests in joint ventures, on input measures. For certain performance obligations, output measures such except where the Group is able to control the reversal of the temporary as the percentage of interviews completed, percentage of reports delivered difference and it is probable that the temporary difference will not reverse to a client and the achievement of any project milestones stipulated in the in the foreseeable future. contract are used to measure progress. Deferred tax assets and liabilities are offset when there is a legally enforceable While most of the studies provided in connection with the Group’s market right to set off current tax assets against current tax liabilities and when they research contracts are undertaken in response to an individual client’s or relate to income taxes levied by the same taxation authority and the Group group of clients’ specifications, in certain instances a study may be developed intends to settle its current tax assets and liabilities on a net basis. as an off-the-shelf product offering sold to a broad client base. For these transactions, revenue is recognised when the product is delivered. When the Deferred tax is calculated at the tax rates that are expected to apply in the terms of the transaction provide for licensing the right to access a product period when the liability is settled or the asset is realised based on enacted on a subscription basis, revenue is recognised over the subscription period, or substantively enacted legislation. typically on a straight-line basis. RETIREMENT BENEFIT COSTS TAXATION The Group accounts for retirement benefit costs in accordance with IAS 19 Corporate taxes are payable on taxable profits at current rates. The tax Employee Benefits. expense represents the sum of the tax currently payable and deferred tax. For defined contribution plans, contributions are charged to the consolidated The Group is subject to corporate taxes in a number of different jurisdictions income statement as payable in respect of the accounting period. and judgement is required in determining the appropriate provision for transactions where the ultimate tax determination is uncertain. In such For defined benefit plans the amounts charged to operating profit are the circumstances, the Group recognises liabilities for anticipated taxes based current service costs, past service costs, administrative expenses and gains on the best information available and where the anticipated liability is both and losses on settlements and curtailments. They are included as part of staff probable and estimable, liabilities are classified as current. Any interest and costs. Past service costs are recognised immediately in the consolidated penalties accrued are included in corporate income taxes both in the income statement when the related plan amendment occurs. Net interest consolidated income statement and balance sheet. Where the final outcome expense is calculated by applying the discount rate to the recognised overall of such matters differs from the amount recorded, any differences may impact surplus or deficit in the plan. the income tax and deferred tax provisions in the period in which the final determination is made. Actuarial gains and losses are recognised immediately in the consolidated statement of comprehensive income. The tax laws that apply to the Group’s subsidiaries may be amended by the relevant tax authorities. Such potential amendments are regularly monitored Where defined benefit plans are funded, the assets of the plan are held and adjustments are made to the Group’s tax liabilities and deferred tax assets separately from those of the Group, in separate independently managed and liabilities where necessary. funds. Pension plan assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and The tax currently payable is based on taxable profit for the year. Taxable profit discounted at a rate equivalent to the current rate of return on a high-quality differs from net profit as reported in the consolidated income statement corporate bond of equivalent currency and term to the plan liabilities. because it excludes items of income or expense that are taxable or deductible The actuarial valuations are obtained at least triennially and are updated at in other years and it further excludes items that are never taxable or each balance sheet date. deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Recognition of a surplus in a defined benefit plan is limited based on the economic gain the Company is expected to benefit from in the future by Deferred tax is the tax expected to be payable or recoverable on differences means of a refund or reduction in future contributions to the plan, in between the carrying amounts of assets and liabilities in the financial statements accordance with IAS 19. and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax PROVISIONS FOR LIABILITIES AND CHARGES liabilities are recognised for all taxable temporary differences unless specifically Provisions comprise liabilities where there is uncertainty about the timing of excepted by IAS 12 Income Taxes. Deferred tax is charged or credited in the settlement, but where a reliable estimate can be made of the amount. These consolidated income statement, except when it relates to items charged or include provisions for other property-related liabilities. Also included are other credited to other comprehensive income or directly to equity, in which case provisions, such as certain long-term employee benefits and legal claims, the deferred tax is also dealt with in other comprehensive income or equity. where the likelihood of settlement is considered probable. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary LEASES differences can be utilised, which can require the use of accounting estimation The Group has adopted IFRS 16 Leases from 1 January 2019. The Group leases and the exercise of judgement. Such assets and liabilities are not recognised most of its offices in cities where it operates. Other lease contracts include if the temporary difference arises from the initial recognition of goodwill or office equipment and motor vehicles. other assets and liabilities (other than in a business combination) in a transaction that affects neither the taxable profit nor the accounting profit. At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to The carrying amount of deferred tax assets is reviewed at each balance sheet control the use of an identified asset for a period of time in exchange date and reduced to the extent that it is no longer probable that sufficient for consideration. taxable profits will be available to allow all or part of the asset to be recovered.

144 WPP ANNUAL REPORT 2019 ACCOUNTING POLICIES FINANCIAL STATEMENTS

The Group recognises a right-of-use asset and a lease liability at the lease £41.0 million (2018: £105.8 million) and an increase in other intangibles of commencement date. The right-of-use asset is initially measured based on the £7.1 million (2018: £19.5 million). The impact on other non-monetary assets initial amount of the lease liability adjusted for any lease payments made at or and liabilities and the impact on the Group’s income statement in the year before the commencement date, plus any initial direct costs incurred, less any were immaterial. lease incentives received. The assets are depreciated over the lease term using the straight-line method. The lease term includes periods covered by SHARE-BASED PAYMENTS an option to extend if the Group is reasonably certain to exercise that option. The Group issues equity-settled share-based payments (including share Right-of-use assets are reviewed for indicators of impairment. options) to certain employees and accounts for these awards in accordance with IFRS 2 Share-Based Payment. Equity-settled share-based payments are The lease liability is initially measured at the present value of the lease measured at fair value (excluding the effect of non-market-based vesting payments that are not paid at the commencement date, discounted using the conditions) at the date of grant. Details regarding the fair value of equity interest rate implicit in the lease or, if that rate cannot be readily determined, settled share-based transactions are set out in notes 23 and 28. the Group’s incremental borrowing rate for the same term as the underlying lease. Lease payments included in the measurement of lease liabilities The fair value determined at the grant date is recognised in the consolidated comprise fixed payments less any lease incentives receivable and variable income statement as an expense on a straight-line basis over the relevant lease payments that depend on an index or a rate as at the commencement vesting period, based on the Group’s estimate of the number of shares date. Lease modifications result in remeasurement of the lease liability. that will ultimately vest and adjusted for the effect of non-market-based vesting conditions. Depreciation is recognised in both costs of services and general and administrative costs and interest expense is recognised under finance costs CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY in the consolidated income statement. IN APPLYING ACCOUNTING POLICIES Management is required to make key decisions and judgements whilst The Group has elected to use the exemption not to recognise right-of-use acknowledging there is estimation uncertainty in the process of applying the assets and lease liabilities for short-term leases that have a lease term of 12 Group’s accounting policies. These estimates and judgements are reviewed months or less and leases of low-value assets (under $5,000). The payments on an ongoing basis. Where judgement has been applied or estimation associated with these leases are recognised as cost of services and general uncertainty exists, the key factors taken into consideration are disclosed in the and administrative costs on a straight-line basis over the lease term. accounting policies and the appropriate note in these financial statements.

In 2018 and 2017 leases were accounted for per IAS 17 Leases. The following The most significant areas of estimation uncertainty include: policies were applicable: –– Goodwill: the discounted cash flow methodology employed by the Group when testing for goodwill impairment requires estimates regarding FINANCE LEASES revenue growth, operating margins, discount rates and working capital Assets held under finance leases are recognised as assets of the Group at the requirements. Further details of the methodology, discount rates, long-term inception of the lease at the lower of their fair value and the present value of growth rates and estimates used in relation to the goodwill impairment are the minimum lease payments. Depreciation on leased assets is charged to the set out in note 14. consolidated income statement on the same basis as owned assets. Leasing –– Payments due to vendors (earnout agreements) and liabilities in respect payments are treated as consisting of capital and interest elements and the of put options: estimates are required regarding growth rates in deriving interest is charged to the consolidated income statement as it is incurred. future financial performance and discount rates to be applied when measuring the liabilities for earnouts and put options. Further details on OPERATING LEASES growth rates and discount rates and the sensitivity to these estimates Operating lease rentals are charged to the consolidated income statement are set out in note 27. on a straight-line basis over the lease term. Any premium or discount on the –– Provision for post-employment benefits: estimates are required in the acquisition of a lease is spread over the life of the lease on a straight-line basis. accounting for defined benefit pension plans, including establishing discount rates, rates of increase in salaries and pensions in payment, TRANSLATION OF FOREIGN CURRENCIES inflation and mortality assumptions. These estimates are made by Foreign currency transactions arising from normal trading activities are management based on the advice of qualified advisors. Details of the recorded at the rates in effect at the date of the transaction. Monetary assets assumptions used and the sensitivity of the benefit obligation to these and liabilities denominated in foreign currencies at the year-end are translated assumptions are set out in note 24. at the year-end exchange rate. Foreign currency gains and losses are credited –– Deferred consideration on the Kantar disposal: as per the terms of the or charged to the consolidated income statement as they arise. Kantar disposal, deferred consideration consisted of amounts expected to be received in future periods on satisfaction of certain conditions and the The income statements of foreign subsidiary undertakings are translated deferral of consideration against services to be provided to Kantar in the into pounds sterling at average exchange rates and the year-end net assets future, as detailed in note 12. Estimates are required in determining amounts of these companies are translated at year-end exchange rates. to be received and the value of services to be provided, taking into account uncertainty in the ultimate timing and resolution of each of these. The Exchange differences arising from retranslation of the opening net assets and sensitivity to these estimates is specific to each individual circumstance and on foreign currency borrowings (to the extent that they hedge the Group’s no individual estimate is expected to result in a material change to the investment in such operations) are reported in the consolidated statement amount recognised. of comprehensive income. –– Taxation: Estimates are required in determining whether a provision is required and, the amount of taxes that will be due, particularly given the Goodwill and fair value adjustments arising on the acquisition of a foreign many countries in which the Group operates. Where the final tax outcome is entity are treated as assets and liabilities of the foreign entity and translated different from the amounts recorded then such differences may expose the at the closing rate. Group to additional tax liabilities or impact the carrying value of deferred tax assets, which would affect the future tax charge. Further details on the HYPERINFLATION IN ARGENTINA tax charge, corporate income tax payable and deferred tax balances are set During 2019 and 2018, Argentina was designated as a hyperinflationary out in the income statement, balance sheet and notes 7 and 17. economy and the financial statements of the Group’s subsidiaries in Argentina have been adjusted for the effects of inflation in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies.

IAS 29 requires that the income statement is adjusted for inflation in the period and translated at the year-end foreign exchange rate and that non-monetary assets and liabilities on the balance sheet are restated to reflect the change in purchasing power caused by inflation from the date of initial recognition. In 2019, this resulted in an increase in goodwill of

WPP ANNUAL REPORT 2019 145 FINANCIAL STATEMENTS ACCOUNTING POLICIES

The most significant areas of judgements include: –– Revenue recognition: judgement is required regarding the timing of recognition, particularly in relation to media volume income with regards to whether it is required to be passed back to the client and in assessing progress on performance obligations where revenue is recognised over time. Further details are set out in the accounting policy. –– Non-current assets held for sale and discontinued operations: judgement is required in determining the timing of classification of the Group's Kantar business as held for sale, particularly with the timing of the held for sale classification. Further details are set out in note 12.

DIRECTORS’ RESPONSIBILITY STATEMENT We confirm that to the best of our knowledge: –– the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and –– the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991.

Mark Read Paul Richardson Chief Executive Officer Group Finance Director 29 April 2020

146 WPP ANNUAL REPORT 2019 FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

2019 20181 20171 Notes £m £m £m Continuing operations Billings2 53,059.0 53,219.7 52,915.4

Revenue 2 13,234.1 13,046.7 13,146.4 Costs of services 3 (10,825.1) (10,559.1) (10,481.6) Gross profit 2,409.0 2,487.6 2,664.8 General and administrative costs 3 (1,113.1) (1,249.7) (1,086.9) Operating profit 1,295.9 1,237.9 1,577.9 Share of results of associates 4 14.7 30.5 98.0 Profit before interest and taxation 1,310.6 1,268.4 1,675.9 Finance and investment income 6 99.0 98.9 89.0 Finance costs 6 (359.1) (279.1) (261.9) Revaluation of financial instruments 6 (68.4) 169.4 243.9 Profit before taxation 982.1 1,257.6 1,746.9 Taxation 7 (275.0) (256.0) (83.0) Profit for the year from continuing operations 707.1 1,001.6 1,663.9

Discontinued operations Profit for the year from discontinued operations 12 10.8 137.8 248.4

Profit for the year 717.9 1,139.4 1,912.3

Attributable to Equity holders of the parent: Continuing operations 627.9 936.5 1,579.5 Discontinued operations (3.8) 126.4 237.1 624.1 1,062.9 1,816.6 Non-controlling interests: Continuing operations 79.2 65.1 84.4 Discontinued operations 14.6 11.4 11.3 93.8 76.5 95.7 717.9 1,139.4 1,912.3

Earnings per share from continuing and discontinued operations Basic earnings per ordinary share 9 49.9p 85.2p 144.0p Diluted earnings per ordinary share 9 49.5p 84.3p 142.4p

Earnings per share from continuing operations Basic earnings per ordinary share 9 50.2p 75.1p 125.2p Diluted earnings per ordinary share 9 49.8p 74.3p 123.8p

Continuing operations Revenue less pass-through costs 2, 32 10,846.5 10,875.7 11,143.9 Headline operating profit 2, 32 1,560.6 1,651.2 1,793.1 Headline operating profit margin 2, 32 14.4% 15.2% 16.1% Headline PBT 32 1,363.0 1,543.0 1,717.6

Notes The accompanying notes form an integral part of this consolidated income statement. 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. 2  Billings is defined on page 204.

WPP ANNUAL REPORT 2019 147 FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

2019 2018 2017 £m £m £m Profit for the year 717.9 1,139.4 1,912.3 Items that may be reclassified subsequently to profit or loss Exchange adjustments on foreign currency net investments (379.4) 78.9 (465.2) Exchange adjustments recycled to the income statement on disposal of discontinued operations (284.0) – – Gain on revaluation of available for sale investments – – 32.1 (663.4) 78.9 (433.1) Items that will not be reclassified subsequently to profit or loss Actuarial (loss)/gain on defined benefit pension plans (36.6) 8.9 17.0 Deferred tax on defined benefit pension plans 6.4 (0.7) (24.6) Movements on equity investments held at fair value through other comprehensive income (141.4) (247.9) – (171.6) (239.7) (7.6) Other comprehensive loss for the year (835.0) (160.8) (440.7) Total comprehensive (loss)/income for the year (117.1) 978.6 1,471.6

Attributable to Equity holders of the parent: Continuing operations 193.5 730.9 1,252.9 Discontinued operations (386.4) 162.2 142.7 (192.9) 893.1 1,395.6 Non-controlling interests: Continuing operations 61.9 73.8 65.2 Discontinued operations 13.9 11.7 10.8 75.8 85.5 76.0 (117.1) 978.6 1,471.6

Note The accompanying notes form an integral part of this consolidated statement of comprehensive income.

148 WPP ANNUAL REPORT 2019 FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

2019 2018 2017 Notes £m £m £m Net cash inflow from operating activities 11 1,850.5 1,693.8 1,408.1 Investing activities Acquisitions 11 (161.3) (283.7) (477.5) Disposal of investments and subsidiaries 11 2,141.0 833.9 296.0 Purchases of property, plant and equipment (339.3) (314.8) (288.9) Purchases of other intangible assets (including capitalised computer software) (54.8) (60.4) (37.3) Proceeds on disposal of property, plant and equipment 174.0 9.5 8.0 Net cash inflow/(outflow) from investing activities 1,759.6 184.5 (499.7) Financing activities Repayment of lease liabilities (249.8) – – Share option proceeds 0.6 1.2 6.4 Cash consideration for non-controlling interests 11 (62.7) (109.9) (47.3) Share repurchases and buybacks 11 (43.8) (207.1) (504.2) Net (decrease)/increase in borrowings 11 (1,713.2) (440.6) 599.6 Financing and share issue costs (6.4) (3.8) (0.8) Equity dividends paid (750.5) (747.4) (751.5) Dividends paid to non-controlling interests in subsidiary undertakings (96.2) (106.2) (87.8) Net cash outflow from financing activities (2,922.0) (1,613.8) (785.6) Net increase in cash and cash equivalents 688.1 264.5 122.8 Translation of cash and cash equivalents (89.7) (61.5) (27.2) Cash and cash equivalents at beginning of year 2,201.2 1,998.2 1,902.6 Cash and cash equivalents including cash held in disposal group at end of year 2,799.6 2,201.2 1,998.2 Cash and cash equivalents held in disposal group presented as held for sale (66.3) – – Cash and cash equivalents at end of year 11 2,733.3 2,201.2 1,998.2

Reconciliation of net cash flow to movement in net debt Net increase in cash and cash equivalents 688.1 264.5 122.8 Cash outflow/(inflow) from decrease/(increase) in debt financing 1,719.6 444.4 (598.8) Other movements (32.5) (1.4) (1.9) Translation differences 168.2 (241.1) 125.3 Movement of net debt in the year 2,543.4 466.4 (352.6) Net debt at beginning of year (4,016.7) (4,483.1) (4,130.5) Net debt including net debt in disposal group at end of year (1,473.3) (4,016.7) (4,483.1) Net debt in disposal group (66.3) – – Net debt at end of year 10 (1,539.6) (4,016.7) (4,483.1)

Note The accompanying notes form an integral part of this consolidated cash flow statement.

WPP ANNUAL REPORT 2019 149 FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2019

2019 2018 Notes £m £m Non-current assets Intangible assets: Goodwill 14 10,170.7 13,202.8 Other 14 1,468.8 1,842.0 Property, plant and equipment 15 876.0 1,083.0 Right-of-use assets 13 1,734.5 – Interests in associates and joint ventures 16 813.0 796.8 Other investments 16 498.3 666.7 Deferred tax assets 17 187.9 153.0 Trade and other receivables 18 137.6 180.0 15,886.8 17,924.3 Current assets Corporate income tax recoverable 165.4 198.7 Trade and other receivables 18 11,822.3 13,101.5 Cash and short-term deposits 2,969.0 2,643.2 14,956.7 15,943.4 Assets classified as held for sale 12 485.3 – 15,442.0 15,943.4 Current liabilities Trade and other payables 19 (14,186.8) (15,038.4) Corporate income tax payable (499.9) (545.9) Short-term lease liabilities 13 (302.2) – Bank overdrafts, bonds and bank loans 21 (461.3) (1,025.1) (15,450.2) (16,609.4) Liabilities associated with assets classified as held for sale 12 (170.4) – (15,620.6) (16,609.4) Net current liabilities (178.6) (666.0) Total assets less current liabilities 15,708.2 17,258.3 Non-current liabilities Bonds and bank loans 21 (4,047.3) (5,634.8) Trade and other payables 20 (483.3) (841.4) Deferred tax liabilities 17 (379.8) (479.5) Provision for post-employment benefits 24 (159.0) (184.3) Provisions for liabilities and charges 22 (247.8) (311.7) Long-term lease liabilities 13 (1,947.5) – (7,264.7) (7,451.7) Net assets 8,443.5 9,806.6 Equity Called-up share capital 28 132.8 133.3 Share premium account 570.3 569.7 Other reserves 29 (501.2) 393.5 Own shares (1,178.7) (1,255.7) Retained earnings 9,048.9 9,541.4 Equity shareholders’ funds 8,072.1 9,382.2 Non-controlling interests 371.4 424.4 Total equity 8,443.5 9,806.6

Note The accompanying notes form an integral part of this consolidated balance sheet.

The financial statements were approved by the Board of Directors and authorised for issue on 29 April 2020.

Signed on behalf of the Board:

Mark Read Paul Richardson Chief Executive Officer Group Finance Director

150 WPP ANNUAL REPORT 2019 FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

Total Called-up Share equity Non- share premium Other Own Retained shareholders’ controlling capital account reserves1 shares earnings funds interests Total £m £m £m £m £m £m £m £m Balance at 1 January 2018 133.3 568.5 354.3 (1,171.1) 9,602.3 9,487.3 468.8 9,956.1 Ordinary shares issued – 1.2 – – – 1.2 – 1.2 Treasury share additions – – – (104.3) – (104.3) – (104.3) Treasury share allocations – – – 1.5 (1.5) – – – Profit for the year – – – – 1,062.9 1,062.9 76.5 1,139.4 Exchange adjustments on foreign currency net investments – – 69.9 – – 69.9 9.0 78.9 Movements on equity investments held at fair value through other comprehensive income – – – – (247.9) (247.9) – (247.9) Actuarial gain on defined benefit pension plans – – – – 8.9 8.9 – 8.9 Deferred tax on defined benefit pension plans – – – – (0.7) (0.7) – (0.7) Other comprehensive income/(loss) – – 69.9 – (239.7) (169.8) 9.0 (160.8) Total comprehensive income – – 69.9 – 823.2 893.1 85.5 978.6 Dividends paid – – – – (747.4) (747.4) (106.2) (853.6) Non-cash share-based incentive plans (including share options) – – – – 84.8 84.8 – 84.8 Tax adjustment on share-based payments – – – – (1.2) (1.2) – (1.2) Net movement in own shares held by ESOP Trusts – – – 18.2 (121.0) (102.8) – (102.8) Recognition/remeasurement of financial instruments – – (30.7) – 10.3 (20.4) – (20.4) Acquisition of subsidiaries2 – – – – (108.1) (108.1) (23.7) (131.8) Balance at 31 December 2018 133.3 569.7 393.5 (1,255.7) 9,541.4 9,382.2 424.4 9,806.6 Accounting policy change (IFRS 16)3 – – – – (128.9) (128.9) – (128.9) Deferred tax on accounting policy change (IFRS 16)3 – – – – 27.8 27.8 – 27.8 Revised balance at 1 January 2019 133.3 569.7 393.5 (1,255.7) 9,440.3 9,281.1 424.4 9,705.5 Ordinary shares issued – 0.6 – – – 0.6 – 0.6 Share cancellations (0.5) – 0.5 – (47.7) (47.7) – (47.7) Treasury share allocations – – – 1.0 (1.0) – – – Profit for the year – – – – 624.1 624.1 93.8 717.9 Exchange adjustments on foreign currency net investments – – (361.4) – – (361.4) (18.0) (379.4) Exchange adjustments recycled to the income statement on disposal of discontinued operations – – (284.0) – – (284.0) – (284.0) Movements on equity investments held at fair value through other comprehensive income – – – – (141.4) (141.4) – (141.4) Actuarial loss on defined benefit pension plans – – – – (36.6) (36.6) – (36.6) Deferred tax on defined benefit pension plans – – – – 6.4 6.4 – 6.4 Other comprehensive loss – – (645.4) – (171.6) (817.0) (18.0) (835.0) Total comprehensive (loss)/income – – (645.4) – 452.5 (192.9) 75.8 (117.1) Dividends paid – – – – (750.5) (750.5) (96.2) (846.7) Non-cash share-based incentive plans (including share options) – – – – 71.4 71.4 – 71.4 Tax adjustment on share-based payments – – – – 3.1 3.1 – 3.1 Net movement in own shares held by ESOP Trusts – – – 76.0 (76.0) – – – Recognition/remeasurement of financial instruments – – 2.5 – 13.1 15.6 – 15.6 Share purchases – close period commitments4 – – (252.3) – – (252.3) – (252.3) Acquisition of subsidiaries2 – – – – (56.3) (56.3) (32.6) (88.9) Balance at 31 December 2019 132.8 570.3 (501.2) (1,178.7) 9,048.9 8,072.1 371.4 8,443.5

Notes The accompanying notes form an integral part of this consolidated statement of changes in equity. 1 Other reserves are analysed in note 29. 2  Acquisition of subsidiaries represents movements in retained earnings and non-controlling interests arising from changes in ownership of existing subsidiaries and recognition of non-controlling interests on new acquisitions. 3  The impact of the adoption of IFRS 16 Leases from 1 January 2019 is described in the accounting policies. 4  During 2019, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 2 January 2020 and ending on 27 February 2020, in accordance with UK listing rules. The commitment resulting from this agreement constitutes a liability at 31 December 2019, which is included in Trade and other payables: amounts falling due within one year and has been recognised as a movement in equity.

WPP ANNUAL REPORT 2019 151 FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

1. GENERAL INFORMATION WPP plc is a company incorporated in Jersey. The address of the registered office is Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES and the address of the principal executive office is Sea Containers, 18 Upper Ground, London, United Kingdom, SE1 9GL. The nature of the Group’s operations and its principal activities are set out in note 2. These consolidated financial statements are presented in pounds sterling.

2. SEGMENT INFORMATION The Group is a leading worldwide creative transformation organisation offering national and multinational clients a comprehensive range of communications, experience, commerce and technology services. Substantially all of the Group’s revenue is from contracts with customers.

Recent restructuring actions, including the mergers of VMLY&R and Wunderman Thompson, the One Ogilvy strategy and the reorganisation of our specialist healthcare agencies, mean that certain units have been reclassified between the previously reported sectors. In order to take account of these changes, the internal reporting of the Group used by the Chief Executive Officer (the Chief Operating Decision Maker) to review performance and allocate resources has also changed. The Group has therefore reassessed its segment information under IFRS 8 Operating Segments. In assessing the Group’s reportable segments, the Directors have considered the similar economic characteristics of certain operating segments, their shared client base and the similar nature of their products or services, amongst other factors. As a result, the Group is now organised into three reportable segments – Global Integrated Agencies; Public Relations; and Specialist Agencies. The Data Investment Management segment is now excluded from the segment analysis as it is classified as discontinued operations. Comparatives have been restated.

Reportable segments Reported contributions were as follows:

Revenue less Headline Headline pass-through operating operating Revenue1 costs2 profit3 profit Continuing operations – Income statement £m £m £m margin4 2019 Global Integrated Agencies5 10,205.2 8,108.1 1,219.5 15.0% Public Relations6 956.5 898.0 140.6 15.7% Specialist Agencies7 2,072.4 1,840.4 200.5 10.9% 13,234.1 10,846.5 1,560.6 14.4% 20188 Global Integrated Agencies5 9,930.7 8,070.8 1,228.2 15.2% Public Relations6 931.7 879.9 139.2 15.8% Specialist Agencies7 2,184.3 1,925.0 283.8 14.7% 13,046.7 10,875.7 1,651.2 15.2% 20178 Global Integrated Agencies5 10,028.6 8,315.3 1,321.3 15.9% Public Relations6 915.0 864.3 123.5 14.3% Specialist Agencies7 2,202.8 1,964.3 348.3 17.7% 13,146.4 11,143.9 1,793.1 16.1%

Notes 1 Intersegment sales have not been separately disclosed as they are not material. 2 Revenue less pass-through costs is defined in note 32. 3 A reconciliation from reported operating profit to headline operating profit is provided in note 32. 4 Headline operating profit margin is defined in note 32. 5 Global Integrated Agencies includes all of Grey, GroupM, Hogarth, Ogilvy, VMLY&R and Wunderman Thompson. 6 Public Relations represents the Group’s specialists in this area and remains as previously reported but excludes Ogilvy PR which now sits within Global Integrated Agencies as part of Ogilvy. 7 Specialist Agencies represent the Group’s other agencies that specialise in certain areas, whether by region or range of services. 8  Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. As a result Data Investment Management is now excluded from the segment analysis.

152 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Depreciation Share of Interests in Share-based Capital and Goodwill results of associates and payments additions1 amortisation2 impairment associates joint ventures Continuing operations – Other information £m £m £m £m £m £m 2019 Global Integrated Agencies 54.3 265.6 392.8 4.8 17.0 164.2 Public Relations 4.6 17.5 31.5 – (0.3) 5.5 Specialist Agencies3 7.1 46.7 84.0 42.9 (2.0) 643.3 66.0 329.8 508.3 47.7 14.7 813.0 20184 Global Integrated Agencies 59.5 255.6 159.1 148.0 25.4 175.1 Public Relations 7.1 12.5 10.8 – 1.3 6.2 Specialist Agencies3 11.7 45.9 39.4 35.9 3.8 615.5 78.3 314.0 209.3 183.9 30.5 796.8 20174 Global Integrated Agencies 77.8 214.3 157.1 – 16.2 179.9 Public Relations 7.2 9.5 9.8 7.5 0.9 5.6 Specialist Agencies3 13.3 47.2 42.2 19.6 80.9 879.7 98.3 271.0 209.1 27.1 98.0 1,065.2

Notes 1 Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software). 2  Depreciation of property, plant and equipment, depreciation of right-of-use assets and amortisation of other intangible assets. 3  Specialist Agencies includes the Kantar associate and amounts previously reported under the Data Investment Management segment. 4  Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies.

Contributions by geographical area were as follows:

2019 20181 20171 2019 20181 20171 Continuing operations £m £m £m Continuing operations Margin Margin Margin Revenue2 Headline operating profit margin2 North America3 4,854.7 4,851.7 5,083.5 North America 16.4% 17.5% 18.8% United Kingdom 1,797.1 1,785.6 1,737.4 United Kingdom 13.6% 12.9% 15.7% Western Continental Europe 2,628.8 2,589.6 2,455.7 Western Continental Europe 12.0% 13.3% 12.1% Asia Pacific, Latin America, Asia Pacific, Latin America, Africa & Middle East and Africa & Middle East and Central & Eastern Europe 3,953.5 3,819.8 3,869.8 Central & Eastern Europe 13.8% 14.6% 15.2%

13,234.1 13,046.7 13,146.4 Notes Revenue less pass-through costs4 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. North America3 4,034.3 4,059.7 4,335.2 2  Headline operating profit margin is defined in note 32. United Kingdom 1,390.1 1,393.8 1,390.0 Western Continental Europe 2,176.4 2,182.9 2,063.7 2019 2018 Continuing operations £m £m Asia Pacific, Latin America, 1 Africa & Middle East and Non -current assets Central & Eastern Europe 3,245.7 3,239.3 3,355.0 North America2 6,833.1 7,269.7 10,846.5 10,875.7 11,143.9 United Kingdom 1,754.6 2,079.2 4 Headline operating profit Western Continental Europe 3,429.8 4,385.6 North America3 662.0 710.6 816.3 Asia Pacific, Latin America, Africa & United Kingdom 188.5 179.6 218.1 Middle East and Central & Eastern Europe 3,681.4 4,028.4 Western Continental Europe 261.5 289.4 249.8 15,698.9 17,762.9 Asia Pacific, Latin America, Notes Africa & Middle East and 1 Non-current assets excluding financial instruments and deferred tax. Central & Eastern Europe 448.6 471.6 508.9 2  North America includes the United States with non-current assets of £6,373.9 million 1,560.6 1,651.2 1,793.1 (2018: £6,791.9 million).

Notes 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. 2 Intersegment sales have not been separately disclosed as they are not material. 3  North America includes the United States with revenue of £4,576.5 million (2018: £4,576.1 million, 2017: £4,782.0 million), revenue less pass-through costs of £3,806.3 million (2018: £3,836.0 million, 2017: £4,089.9 million) and headline operating profit of £620.6 million (2018: £674.4 million, 2017: £773.5 million). 4  Revenue less pass-through costs, headline operating profit and headline operating profit margin are defined in note 32.

WPP ANNUAL REPORT 2019 153 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. COSTS OF SERVICES AND GENERAL Investment write-downs of £91.7 million in 2017 include £53.1 million in relation AND ADMINISTRATIVE COSTS to comScore Inc., which had not released any financial statements in relation to its 2015, 2016 or 2017 results due to an internal investigation by their Audit 2019 20181 20171 Committee. In 2017, the market value of comScore Inc. fell below the Group’s Continuing operations £m £m £m carrying value. Other investment write-downs relate to certain non-core Costs of services 10,825.1 10,559.1 10,481.6 minority investments in the United States where forecast financial General and administrative costs 1,113.1 1,249.7 1,086.9 performance and/or liquidity issues indicate a permanent decline in the 11,938.2 11,808.8 11,568.5 recoverability of the Group’s investment.

Costs of services and general and administrative costs include: Gains on disposal of investments and subsidiaries of £40.4 million in 2019 include a gain of £28.6 million on the disposal of the Group’s interest in Chime. 2019 20181 20171 Gains on disposal of investments and subsidiaries of £237.9 million in 2018 Continuing operations £m £m £m include a gain of £185.3 million on the disposal of the Group’s interest in Staff costs (note 5) 7,090.6 6,950.6 7,065.1 Globant S.A. Gains in 2017 of £98.7 million include £92.3 million on the sale of Establishment costs 672.9 756.6 769.5 the Group’s interest in Asatsu-DK Inc following its acquisition by Bain Capital. Media pass-through costs 1,656.2 1,458.0 1,429.4 In 2019, restructuring and transformation costs of £153.5 million comprise Other costs of services and general and administrative costs2 2,518.5 2,643.6 2,304.5 £116.3 million of restructuring costs and £37.2 million transformation costs with respect to strategic initiatives including co-locations in major cities, IT 11,938.2 11,808.8 11,568.5 transformation and shared services. Restructuring and transformation costs of Other costs of services and general and administrative costs include: £121.1 million are in relation to the continuing restructuring plan, first outlined at the Investor Day in December 2018. As part of that plan, restructuring 2019 20181 20171 actions have been taken to right-size under-performing businesses, address Continuing operations £m £m £m high cost severance markets and simplify operational structures. Further Goodwill impairment (note 14) 47.7 183.9 27.1 restructuring and transformation costs will be incurred in 2020 and 2021. Investment write-downs 7.5 2.0 91.7 The remaining £32.4 million primarily comprises transformation costs in relation to the continuing global IT transformation programme. Restructuring and transformation costs 153.5 265.5 56.8 Litigation settlement (16.8) – – In 2018, restructuring and transformation costs of £265.5 million comprise Gain on sale of freehold property in New York (7.9) – – £179.7 million of restructuring costs and £85.8 million transformation costs Amortisation and impairment of acquired with respect to strategic initiatives including co-locations in major cities, IT intangible assets 121.5 201.8 138.0 transformation and shared services. In the fourth quarter of 2018, £212.3 million Amortisation of other intangible assets 21.2 20.7 20.1 of restructuring and transformation costs were incurred in relation to the Depreciation of property, plant strategic review of the Group’s operations. The remaining £53.2 million and equipment 185.5 188.6 189.0 primarily relates to restructuring costs recorded in the first half of 2018 and Depreciation of right-of-use assets 301.6 – – transformation costs in relation to the IT transformation programme. Losses on sale of property, plant and equipment 3.2 0.6 1.2 In 2017, restructuring and transformation costs of £56.8 million predominantly Gains on disposal of investments comprise £33.7 million of severance costs arising from a structural assessment and subsidiaries (40.4) (237.9) (98.7) of certain of the Group’s operations, primarily in the mature markets; and (Gains)/losses on remeasurement of equity £12.8 million of costs resulting from the project to transform and rationalise interests arising from a change in scope of the Group’s IT services and infrastructure including costs relating to the ownership (0.4) (2.0) 0.3 cyber attack in June 2017. Net foreign exchange losses/(gains) 6.1 (13.0) 8.0 Short-term lease expense 83.8 – – In 2019, the Group received £16.8 million in settlement of a class action lawsuit Low-value lease expense 2.9 – – against Comscore Inc. for providing materially false and misleading information regarding their company and its financial performance. Notes 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. In March 2019, the Group entered into a sale and leaseback agreement for its 2  Other costs of services and general and administrative costs include £731.4 million office space at 3 Columbus Circle in New York. The Group sold the freehold (2018: £713.0 million, 2017: £573.1 million) of other pass-through costs. for proceeds of £159.0 million and simultaneously entered into a 15-year lease. The net gain recognised from the sale and leaseback is £7.9 million. In 2019, operating profit includes credits totalling £26.9 million (2018: £25.6 million, 2017: £40.9 million) relating to the release of excess provisions Auditors’ remuneration: and other balances established in respect of acquisitions completed prior to 2019 2018 2017 2018. Further details of the Group’s approach to acquisition reserves, as £m £m £m required by IFRS 3 Business Combinations, are given in note 30. Fees payable to the Company’s auditors for the audit of the Company’s annual accounts 1.5 1.4 1.4 Amortisation and impairment of acquired intangibles in 2019 includes an The audit of the Company’s subsidiaries pursuant to impairment charge in the year of £26.5 million (2018: £89.1 million, 2017: legislation 28.0 25.21 20.7 £6.0 million) in regard to certain brand names that are no longer in use and Other services pursuant to legislation 5.0 4.2 4.0 customer relationships where the underlying clients have been lost. Fees payable to the auditors pursuant to legislation 34.5 30.8 26.1 In 2019, the goodwill impairment charge of £47.7 million (2018: £183.9 million, Tax advisory services – – 0.1 2017: £27.1 million) relates to a number of under-performing businesses in the Tax compliance services – 0.1 0.1 Group. In certain markets, the impact of current local economic conditions and Other services2 8.2 4.7 4.6 trading circumstances on these businesses is sufficiently severe to indicate impairment to the carrying value of goodwill. In 2018, the goodwill impairment Total non-audit fees 8.2 4.8 4.8 charge primarily relates to a charge of £148.0 million on VMLY&R. Total fees 42.7 35.6 30.9

Note 1 Includes a true-up of £3.5 million. 2  Other services include audits for earnout purposes.

154 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

4. SHARE OF RESULTS OF ASSOCIATES 6. FINANCE AND INVESTMENT INCOME, FINANCE COSTS Share of results of associates include: AND REVALUATION OF FINANCIAL INSTRUMENTS 20191 20182 20172 Finance and investment income includes: Continuing operations £m £m £m 1 1 Share of profit before interest and taxation 99.2 110.8 129.7 2019 2018 2017 Continuing operations £m £m £m Share of exceptional (losses)/gains (47.8) (41.5) 0.6 Income from equity investments 18.3 15.2 16.7 Share of interest and non-controlling interests (19.4) (15.1) (12.6) Interest income 80.7 83.7 72.3 Share of taxation (17.3) (23.7) (19.7) 99.0 98.9 89.0 14.7 30.5 98.0

Notes Finance costs include: 1 From 5 December 2019 approximately 90% of the Kantar business is treated as a 40% associate following the completion of the transaction outlined in note 12. 2019 20181 20171 2  Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held Continuing operations £m £m £m for Sale and Discontinued Operations, as described in the accounting policies. Net interest expense on pension plans 3.5 3.6 5.4 Interest on other long-term employee benefits 3.9 3.5 3.3 5. OUR PEOPLE Interest expense and similar charges2 252.0 272.0 253.2 Our staff numbers, including the Kantar disposal group, averaged 132,823 for Interest expense related to lease liabilities 99.7 – – the year ended 31 December 2019 against 133,903 in 2018 and 134,428 in 2017. 359.1 279.1 261.9 Their geographical distribution was as follows:

2019 2018 2017 Revaluation of financial instruments include: North America 25,008 25,990 27,399 United Kingdom 14,192 14,331 14,197 2019 20181 20171 Continuing operations £m £m £m Western Continental Europe 26,973 26,825 25,700 Movements in fair value of treasury instruments 0.4 (11.0) 0.4 Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe 66,650 66,757 67,132 Premium on the early repayment of bonds (63.4) – – 132,823 133,903 134,428 Revaluation of investments held at fair value through profit or loss 9.1 67.8 – Revaluation of put options over Their reportable segment distribution was as follows: non-controlling interests (13.5) 34.4 51.4 2019 2018 2017 Revaluation of payments due to vendors Global Integrated Agencies 82,295 83,015 81,537 (earnout agreements) (1.0) 78.2 192.1 Data Investment Management 26,325 27,813 28,014 (68.4) 169.4 243.9

Public Relations 6,890 6,891 6,899 Notes Specialist Agencies 17,313 16,184 17,978 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for 132,823 133,903 134,428 Sale and Discontinued Operations, as described in the accounting policies. 2  Interest expense and similar charges are payable on bank overdrafts, bonds and bank loans At the end of 2019, staff numbers were 106,786 (2018: 134,281, 2017: 134,413). held at amortised cost.

The majority of the Group’s long-term debt is represented by $1,563 million Staff costs include: of US dollar bonds at an average interest rate of 4.06%, €3,100 million of 1 1 2019 2018 2017 Eurobonds at an average interest rate of 1.82% and £400 million of Sterling Continuing operations £m £m £m bonds at an average interest rate of 2.88%. Wages and salaries 4,946.2 4,828.0 4,937.5 Cash-based incentive plans 227.6 233.0 196.5 Average borrowings under the US Dollar Revolving Credit Facilities (note 10) Share-based incentive plans 66.0 78.3 98.3 amounted to the equivalent of $72 million at an average interest rate of 1.11% Social security costs 591.7 579.0 580.8 (2018: $125 million at an average interest rate of 0.96%). Pension costs 169.7 160.9 161.3 Severance 42.6 30.0 36.8 Average borrowings under the Australian Dollar Revolving Credit Facilities, Other staff costs2 1,046.8 1,041.4 1,053.9 amounted to A$310 million at an average rate of 2.95% (2018: A$439 million 7,090.6 6,950.6 7,065.1 at an average rate of 3.27%).

3 Staff cost to revenue less pass-through costs ratio 65.4% 63.9% 63.4% Average borrowings under the US Commercial Paper Programme for 2019 Notes amounted to $41 million at an average interest rate of 2.46% inclusive of margin 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets (2018: $540 million at an average interest rate of 2.28% inclusive of margin). Held for Sale and Discontinued Operations, as described in the accounting policies. 2  Freelance and temporary staff costs are included in other staff costs. Average borrowings under the Euro Commercial Paper Programme for 2019 3 Revenue less pass-through costs is defined in note 32. amounted to £255 million at an average interest rate of 1.16% inclusive of currency swaps (2018: £nil). Included above are charges of £2.0 million, excluding revision to prior year awards, (2018: £2.0 million, 2017: £12.3 million) for share-based incentive plans in respect of key management personnel (who comprise the Directors of the Group). Further details of compensation for key management personnel are disclosed on pages 114-137.

WPP ANNUAL REPORT 2019 155 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. TAXATION The calculation of the headline tax rate is as follows: The tax rate on reported PBT was 28.0% (2018: 20.4%, 2017: 4.8%). The headline tax rate was 22.0% (2018: 20.7%, 2017: 18.5%). 2019 20181 20171 Continuing operations £m £m £m 2 The tax charge comprises: Headline PBT 1,363.0 1,543.0 1,717.6 Tax charge 275.0 256.0 83.0 2019 20181 20171 Tax (charge)/credit relating to gains on Continuing operations £m £m £m disposal of investments and subsidiaries (6.9) (0.8) 2.1 Corporation tax Tax credit relating to gain on sale of Current year 423.0 404.2 383.0 freehold property in New York 0.5 – – Prior years (63.4) (108.1) (97.2) Tax charge relating to litigation settlement (4.2) – – 359.6 296.1 285.8 Deferred tax impact of the amortisation of acquired intangible assets and other Deferred tax goodwill items 13.3 12.9 31.8 Current year (78.3) (41.5) (207.4) Tax credit relating to restructuring Prior years (6.3) 1.4 4.6 and transformation costs 29.2 41.1 10.0 (84.6) (40.1) (202.8) Tax impact of US tax reform – 11.6 191.5 Tax charge 275.0 256.0 83.0 Deferred tax relating to gains on disposal of investments and subsidiaries (7.3) (0.7) 0.2 The corporation tax credit for prior years in 2019, 2018 and 2017, mainly Headline tax charge 299.6 320.1 318.6 comprises the release of a number of provisions following the resolution Headline tax rate 22.0% 20.7% 18.5% of tax matters in various countries. Notes 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-Current Assets Held for The tax charge for the year can be reconciled to profit before taxation in the Sale and Discontinued Operations, as described in the accounting policies. consolidated income statement as follows: 2  Headline PBT is defined in note 32.

2019 20181 20171 FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS Continuing operations £m £m £m Given the Group’s geographic mix of profits and the changing international Profit before taxation 982.1 1,257.6 1,746.9 tax environment, the headline tax rate is expected to increase slightly over Tax at the corporation tax rate of 19.0%2 186.6 238.9 336.3 the next few years. Tax effect of share of results of associates (2.7) (5.8) (18.8) Irrecoverable withholding taxes 44.7 48.9 31.6 The tax charge may also be affected by the impact of acquisitions, disposals Items that are not deductible/(taxable) and other corporate restructurings, the resolution of open tax issues, and the in determining taxable profit 96.0 22.0 (10.7) ability to use brought forward tax losses. Changes in local or international tax Effect of different tax rates in subsidiaries rules, for example, as a consequence of the financial support programmes operating in other jurisdictions 77.1 71.2 95.2 being implemented by governments during the Covid-19 crisis, changes arising US Transition Tax related to unremitted from the application of existing rules, or challenges by tax or competition foreign earnings – (4.6) 20.1 authorities, for example, the European Commission’s State Aid decision into Effect of change in US tax rate on deferred tax balances – – (211.6) the Group Financing Exemption in the UK CFC rules, may expose us to significant additional tax liabilities or impact the carrying value of our deferred Origination and reversal on unrecognised temporary differences (3.4) 5.1 (18.9) tax assets, which would affect the future tax charge. Tax losses not recognised or utilised in the year 13.2 19.9 32.5 Utilisation of tax losses not previously recognised (42.7) (25.5) (10.4) The Group does not currently expect any material additional charges, or credits, to arise in respect of these matters, beyond the amounts already Recognition of temporary differences not previously recognised (24.1) (7.4) (69.7) provided. Liabilities relating to these open and judgemental matters are based Net release of prior year provisions in relation upon estimates of whether additional taxes will be due after taking into to acquired businesses (19.9) (20.4) (15.0) account external advice where appropriate. Where the final tax outcome of Other prior year adjustments (49.8) (86.3) (77.6) these matters is different from the amounts which were initially recorded then Tax charge 275.0 256.0 83.0 such differences will impact the current and deferred income tax assets and Effective tax rate on profit before tax 28.0% 20.4% 4.8% liabilities in the period in which such determination is made.

Notes TAX RISK MANAGEMENT 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. We maintain constructive engagement with the tax authorities and relevant 2  As the Group is subject to the tax rates of more than one country, it has chosen to present government representatives, as well as active engagement with a wide range its reconciliation of the tax charge using the UK corporation tax rate of 19.0% (2018: 19.0%, of international companies and business organisations with similar issues. We 2017: 19.25%). engage advisors and legal counsel to obtain opinions on tax legislation and principles. We have a Tax Risk Management Strategy in place which sets out The headline tax charge excludes the impact of items that are excluded from the controls established and our assessment procedures for decision-making headline PBT and excludes the deferred tax impact of the amortisation of and how we monitor tax risk. We monitor proposed changes in taxation acquired intangible assets and other goodwill items as these will only reverse legislation and ensure these are taken into account when we consider our in the event of future disposals of those assets, in which case any accounting future business plans. Our Directors are informed by management of any tax gain or loss would be excluded from headline profits. law changes, the nature and status of any significant ongoing tax audits, and other developments that could materially affect the Group's tax position.

156 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

8. ORDINARY DIVIDENDS DILUTED EPS Amounts recognised as distributions to equity holders in the year: The calculation of diluted reported and headline EPS is as follows:

2019 2018 2017 2019 2018 2017 Continuing operations 2019 2018 2017 Per share Pence per share £m £m £m Diluted reported earnings (£m) 627.9 936.5 1,579.5 2018 Final dividend 37.30p 37.30p 37.05p 466.4 464.6 467.2 Diluted headline earnings (£m) 984.2 1,153.1 1,314.6 2019 Interim dividend 22.70p 22.70p 22.70p 284.1 282.8 284.3 Weighted average shares used in diluted 60.00p 60.00p 59.75p 750.5 747.4 751.5 EPS calculation (m) 1,260.6 1,261.2 1,275.8 Diluted reported EPS 49.8p 74.3p 123.8p 2019 2018 2017 2019 2018 2017 Diluted headline EPS 78.1p 91.4p 103.0p Per ADR1 Cents per ADR $m $m $m 2018 Final dividend 249.00¢ 240.34¢ 250.96¢ 622.8 598.7 632.9 Discontinued operations 2019 2018 2017 2019 Interim dividend 144.88¢ 151.53¢ 146.27¢ 362.6 377.6 366.4 Diluted reported earnings (£m) (3.8) 126.4 237.1 393.88¢ 391.87¢ 397.23¢ 985.4 976.3 999.3 Diluted headline earnings (£m) 184.5 209.6 221.9 Weighted average shares used in diluted Note EPS calculation (m) 1,260.6 1,261.2 1,275.8 1 These figures have been translated for convenience purposes only, using the approximate Diluted reported EPS (0.3p) 10.0p 18.6p average rate for the year of US$1.2765 (2018: US$1.3351, 2017: US$1.2887). This conversion should not be construed as a representation that the pound sterling amounts actually represent, Diluted headline EPS 14.6p 16.6p 17.4p or could be converted into, US dollars at the rates indicated. Continued and discontinued operations 2019 2018 2017 Given the significant uncertainty over the coming months, we are taking Diluted reported earnings (£m) 624.1 1,062.9 1,816.6 prudent action now to maintain our liquidity and ensure that we emerge Diluted headline earnings (£m) 1,168.7 1,362.7 1,536.5 from this global crisis strong, secure, and ready to meet the continuing needs Weighted average shares used in diluted of our clients, shareholders and other stakeholders. Therefore, the Board is EPS calculation (m) 1,260.6 1,261.2 1,275.8 suspending the 2019 final dividend of 37.3 pence per share, which was due Diluted reported EPS 49.5p 84.3p 142.4p to be proposed at the 2020 AGM. Diluted headline EPS 92.7p 108.0p 120.4p

The payment of dividends will not have any tax consequences for the Group. Diluted EPS has been calculated based on the diluted reported and diluted headline earnings amounts above. At 31 December 2019, options to purchase 9. EARNINGS PER SHARE 19.3 million ordinary shares (2018: 16.9 million, 2017: 8.2 million) were outstanding, BASIC EPS but were excluded from the computation of diluted earnings per share because The calculation of basic reported and headline EPS is as follows: the exercise prices of these options were greater than the average market price of the Group’s shares and, therefore, their inclusion would have been accretive. Continuing operations 2019 2018 2017 1 Reported earnings (£m) 627.9 936.5 1,579.5 A reconciliation between the shares used in calculating basic and diluted EPS Headline earnings (£m) (note 32) 984.2 1,153.1 1,314.6 is as follows: Weighted average shares used in basic EPS calculation (m) 1,250.0 1,247.8 1,261.1 2019 2018 2017 Reported EPS 50.2p 75.1p 125.2p m m m Headline EPS 78.7p 92.4p 104.2p Average shares used in basic EPS calculation 1,250.0 1,247.8 1,261.1 Dilutive share options outstanding 0.3 1.6 1.8 Discontinued operations 2019 2018 2017 Other potentially issuable shares 10.3 11.8 12.9 Reported earnings1 (£m) (3.8) 126.4 237.1 Shares used in diluted EPS calculation 1,260.6 1,261.2 1,275.8 Headline earnings (£m) (note 12) 184.5 209.6 221.9 At 31 December 2019 there were 1,328,167,813 (2018: 1,332,678,227, 2017: Weighted average shares used in basic EPS calculation (m) 1,250.0 1,247.8 1,261.1 1,332,511,552) ordinary shares in issue, including 70,787,730 treasury shares Reported EPS (0.3p) 10.1p 18.8p (2018: 70,854,553, 2017: 62,578,938). Headline EPS 14.8p 16.8p 17.6p

Continued and discontinued operations 2019 2018 2017 Reported earnings1 (£m) 624.1 1,062.9 1,816.6 Headline earnings (£m) 1,168.7 1,362.7 1,536.5 Weighted average shares used in basic EPS calculation (m) 1,250.0 1,247.8 1,261.1 Reported EPS 49.9p 85.2p 144.0p Headline EPS 93.5p 109.2p 121.8p

Note 1 Reported earnings is equivalent to profit for the year attributable to equity holders of the parent.

WPP ANNUAL REPORT 2019 157 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. SOURCES OF FINANCE The following table is an analysis of future anticipated cash flows in relation to The following table summarises the equity and debt financing of the Group, the Group’s debt, on an undiscounted basis which, therefore, differs from the and changes during the year: fair value and carrying value:

Shares Debt 2019 2018 2019 2018 2019 2018 £m £m Analysis of changes in financing £m £m £m £m Within one year (324.8) (748.4) Beginning of year 703.0 701.8 6,217.9 6,481.3 Between one and two years (204.0) (596.8) Ordinary shares issued 0.6 1.2 – – Between two and three years (692.1) (937.1) Share cancellations (0.5) – – – Between three and four years (726.3) (742.5) Net decrease in drawings on bank Between four and five years (634.2) (786.8) loans and corporate bonds – – (1,713.2) (440.6) Over five years (2,761.9) (4,199.7) Amortisation of financing costs included Debt financing (including interest) under the Revolving in debt – – 10.3 7.7 Credit Facility and in relation to unsecured loan notes (5,343.3) (8,011.3) Changes in fair value due to Short-term overdrafts – within one year (235.7) (442.0) hedging arrangements – – 14.3 (9.9) Future anticipated cash flows (5,579.0) (8,453.3) Other movements – – 1.5 (0.2) Effect of discounting/financing rates 1,070.4 1,793.4 Exchange adjustments – – (257.9) 179.6 Debt financing (4,508.6) (6,659.9) End of year 703.1 703.0 4,272.9 6,217.9 Cash and short-term deposits 2,969.0 2,643.2 Note Net debt (1,539.6) (4,016.7) The table above excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash flow statement. Analysis of fixed and floating rate debt by currency including the effect of interest rate and cross-currency swaps: SHARES At 31 December 2019, the Company’s share base was entirely composed Fixed Floating Period of ordinary equity share capital and share premium of £703.1 million 2019 £m rate1 basis (months)1 (2018: £703.0 million), further details of which are disclosed in note 28. Currency $ – fixed 1,178.2 4.06 n/a 95 DEBT £ – fixed 844.1 2.73 n/a 188 US$ bonds The Group has in issue $500 million of 3.625% bonds due € – fixed 1,777.7 2.34 n/a 82 September 2022, $750 million of 3.75% bonds due September 2024, $93 million – floating 423.3 n/a EURIBOR 16 of 5.125% bonds due September 2042 and $220 million of 5.625% bonds due Other 49.6 n/a n/a n/a November 2043. 4,272.9 Eurobonds The Group has in issue €750 million of 3.00% bonds due November 2023, €500 million of 1.375% bonds due March 2025, €750 million Fixed Floating Period 2018 £m rate1 basis (months)1 of 2.25% bonds due September 2026, €600 million of 1.625% bonds due March Currency 2030, €250 million of Floating Rate Notes carrying a coupon of 3m EURIBOR + 0.32% due May 2020 and €250 million of Floating Rate Notes carrying a $ – fixed 1,154.8 4.58 n/a 181 coupon of 3m EURIBOR +0.45% due March 2022. – floating 1,029.6 n/a LIBOR n/a £ – fixed 1,044.1 3.43 n/a 232 Sterling bonds The Group has in issue £400 million of 2.875% bonds due € – fixed 2,425.9 1.99 n/a 75 September 2046. – floating 449.2 n/a EURIBOR n/a Other 114.3 n/a n/a n/a Revolving Credit Facility The Group has a five-year Revolving Credit Facility 6,217.9 of $2.5 billion due March 2024, signed in March 2019. The Group’s borrowing Note under these facilities, which are drawn down predominantly in pounds 1 Weighted average. These rates do not include the effect of gains on interest rate swap sterling, averaged the equivalent of $72 million in 2019. In June 2018, the terminations that are written to income over the life of the original instrument. Group's subsidiary, WPP AUNZ entered into a A$150 million Revolving Credit Facility due June 2019 and a A$370 million Revolving Credit Facility due June The following table is an analysis of future undiscounted anticipated cash flows 2021. In May 2019, the A$150 million Revolving Credit Facility was extended to in relation to the Group’s financial derivatives, which include interest rate swaps, June 2020. In December 2019, the A$370 million Revolving Credit Facility was forward contracts and other foreign exchange swaps assuming interest rates reduced to A$270 million due June 2021. The Group’s borrowings under the and foreign exchange rates as at 31 December: Australian dollar facilities which were drawn down in Australian dollars and New Zealand dollars, averaged the equivalent of A$310 million in 2019. Financial liabilities Financial assets The Group had available undrawn committed credit facilities of Payable Receivable Payable Receivable £2,005.6 million at 31 December 2019 (2018: £2,074.7 million). 2019 £m £m £m £m Within one year 113.6 107.8 44.0 45.0 Borrowings under the $2.5 billion Revolving Credit Facility are governed by Between one and two years 17.5 10.9 – – certain financial covenants based on the results and financial position of the Between two and three years 11.8 6.2 – – Group. Borrowings under the A$150 million Revolving Credit Facility and the Between three and four years 11.6 6.1 – – A$270 million Revolving Credit Facility are governed by certain financial Between four and five years 11.6 6.1 – – covenants based on the results and financial position of WPP AUNZ. Over five years 449.8 456.3 – – 615.9 593.4 44.0 45.0 The $2.5 billion Revolving Credit Facility, due March 2024, includes terms which require the consent of the majority of the lenders if a proposed merger or consolidation of the Company would alter its legal personality or identity. Financial liabilities Financial assets On 14 February 2020, the lending banks approved an extension of the term Payable Receivable Payable Receivable 2018 £m £m £m £m of the Revolving Credit Facility to March 2025. Within one year 229.3 221.9 124.6 120.6 COMMERCIAL PAPER PROGRAMMES Between one and two years 50.0 45.3 11.8 6.5 The Group operates commercial paper programmes using its Revolving Credit Between two and three years 688.4 685.3 11.5 6.4 Facility as a backstop. The average US commercial paper outstanding in 2019 was Between three and four years 408.5 406.6 11.6 6.5 $41 million (2018: $540 million). The average Euro commercial paper outstanding Between four and five years – – 11.6 6.6 in 2019 was £255 million (2018: £nil) inclusive of the effect of currency swaps. Over five years – – 461.4 498.2 There was no US or Euro Commercial Paper outstanding at 31 December 2019. 1,376.2 1,359.1 632.5 644.8

158 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

11. ANALYSIS OF CASH FLOWS Share repurchases and buybacks: The following tables analyse the items included within the main cash flow headings on page 149. 2019 2018 2017 £m £m £m Net cash from operating activities: Purchase of own shares by ESOP Trusts – (102.8) (214.6) Shares purchased into treasury (43.8) (104.3) (289.6) 2019 2018 2017 Net cash outflow (43.8) (207.1) (504.2) £m £m £m Profit for the year 717.9 1,139.4 1,912.3 Net (decrease)/increase in borrowings: Taxation 353.8 323.9 197.0

Revaluation of financial instruments 77.8 (172.9) (262.2) 2019 2018 2017 Finance costs 376.4 289.3 269.8 £m £m £m Finance and investment income (102.6) (104.8) (95.2) (Decrease)/increase in drawings on bank loans (70.6) (819.3) 785.6 Share of results of associates (21.2) (43.5) (113.5) Repayment of €600 million bonds (512.7) – – Goodwill impairment on classification as held for Repayment of $812 million bonds (618.8) – – sale 94.5 – – Partial repayment of $272 million bonds (135.4) (20.8) – Gain on sale of discontinued operations (73.8) – – Partial repayment of $450 million bonds (176.2) (37.3) – Attributable tax expense on sale of discontinued Repayment of £200 million bonds (199.5) – – operations 157.4 – – Proceeds from issue of €250 million bonds – 218.8 214.0 Operating profit of continuing and discontinued operations 1,580.2 1,431.4 1,908.2 Proceeds from issue of €500 million bonds – 438.0 – Adjustments for Repayment of €252 million bonds – (220.0) – Non-cash share-based incentive plans (including Repayment of £400 million bonds – – (400.0) share options) 71.4 84.8 105.0 Net cash (outflow)/inflow (1,713.2) (440.6) 599.6 Depreciation of property, plant and equipment 203.2 225.1 230.7 Depreciation of right-of-use assets 317.9 – – Cash and cash equivalents: Impairment of goodwill 47.7 183.9 27.1 Amortisation and impairment of acquired 2019 2018 2017 intangible assets 135.6 280.0 195.1 £m £m £m Amortisation of other intangible assets 29.6 38.7 36.3 Cash at bank and in hand 2,105.4 2,010.8 2,049.6 Investment write-downs 7.5 2.0 95.9 Short-term bank deposits 863.6 632.4 341.8 Gains on disposal of investments and subsidiaries (45.1) (235.5) (129.0) Overdrafts1 (235.7) (442.0) (393.2) (Gains)/losses on remeasurement of equity 2,733.3 2,201.2 1,998.2 interests arising from a change in scope of ownership (0.4) (2.0) 0.3 Note Gain on sale of freehold property in New York (7.9) – – 1 Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group’s cash management. Losses on sale of property, plant and equipment 3.2 0.6 1.1 Operating cash flow before movements The Group considers that the carrying amount of cash and cash equivalents in working capital and provisions 2,342.9 2,009.0 2,470.7 approximates their fair value. Decrease/(increase) in trade receivables and accrued income 159.0 (298.9) (90.4) Increase/(decrease) in trade payables and 12. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS deferred income 394.7 500.9 (170.8) In July 2019, the Group announced the proposed sale of its Kantar business to Increase in other receivables (263.8) (52.9) (110.6) Bain Capital. On 5 December 2019 the first stage of the transaction completed, Decrease in other payables – short-term (16.4) (31.8) (122.8) consisting of approximately 90% of the Kantar group, with consideration of Increase in other payables – long-term 53.7 0.4 20.1 £2,140.2 million after tax and disposal costs. The sale involved the Group Increase/(decrease) in provisions 23.1 48.0 (57.3) disposing of the Kantar business and holding 40% equity stakes post-transaction which are treated as associates. This generated a pre-tax gain of £73.8 million, Cash generated by operations 2,693.2 2,174.7 1,938.9 tax charge of £157.4 million and goodwill impairment of £94.5 million for the Corporation and overseas tax paid (536.0) (383.6) (424.7) Group. The remaining stages of the transaction are expected to complete in Payment on early settlement of bonds (63.4) – – 2020 with further consideration expected to be approximately £200 million Interest and similar charges paid (270.6) (252.8) (246.6) after tax and disposal costs. Interest paid on lease liabilities (105.1) – – Interest received 80.8 90.4 76.9 As outlined in the accounting policies, the criterion of a highly probable sale Investment income 18.3 15.4 16.8 was met on 9 July 2019, following Board approval of the disposal of Kantar Dividends from associates 33.3 49.7 46.8 to Bain Capital, representing the date at which the appropriate level of Net cash inflow from operating activities 1,850.5 1,693.8 1,408.1 management was committed to a plan to sell the disposal group. The Kantar disposal group therefore became held for sale on this date. Acquisitions and disposals: The Kantar group (both the portion that has been disposed of by year end 2019 2018 2017 and the portion that is expected to be disposed of in 2020) is classified as £m £m £m a discontinued operation under IFRS 5 as it forms a separate major line Initial cash consideration (3.9) (126.7) (214.8) of business and there was a single co-ordinated plan to dispose of it. Kantar Cash and cash equivalents acquired – 11.3 28.9 represents materially all of the Data Investment Management segment of Earnout payments (130.2) (120.2) (199.1) the Group. Purchase of other investments (including associates) (27.2) (48.1) (92.5) Acquisitions (161.3) (283.7) (477.5) As at 31 December 2019 the remaining portion of the company not yet sold Proceeds on disposal of investments is disclosed as held for sale. and subsidiaries1 2,468.5 849.0 296.0 Cash and cash equivalents disposed (327.5) (15.1) – Disposals of investments and subsidiaries 2,141.0 833.9 296.0 Cash consideration for non-controlling interests (62.7) (109.9) (47.3) Net acquisition payments and disposal proceeds 1,917.0 440.3 (228.8)

Note 1 Proceeds on disposal of investments and subsidiaries includes return of capital from investments in associates.

WPP ANNUAL REPORT 2019 159 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Headline operating profit margin before and after share of results of associates: CONTINUED Results of the discontinued operations, which have been included in profit for £m Margin 2019 Margin 2018 Margin 2017 the year, were as follows: Revenue less pass- through costs 1,806.6 1,950.9 2,025.7 2019 2018 2017 Headline operating £m £m £m profit 17.0% 307.7 15.9% 310.9 17.8% 361.3 Revenue 2,387.5 2,555.7 2,657.8 Share of results of Costs of services (1,951.5) (2,104.4) (2,147.4) associates (excluding exceptional gains/losses)1 6.2 13.2 15.3 Gross profit 436.0 451.3 510.4 Headline PBIT 17.4% 313.9 16.6% 324.1 18.6% 376.6 General and administrative costs (151.7) (257.8) (180.1) Operating profit 284.3 193.5 330.3 Note 1 Under IFRS 5, when an associate is classified as held for sale, equity accounting will cease. This means Share of results of associates 6.5 13.0 15.5 that there is no share of results of associates recognised for the Kantar group from 9 July 2019. Profit before interest and taxation 290.8 206.5 345.8 Finance income 3.6 5.4 6.2 Calculation of headline EBITDA: Finance costs (17.3) (9.7) (7.9) Revaluation of financial instruments (9.4) 3.5 18.3 2019 2018 2017 £m £m £m Profit before taxation 267.7 205.7 362.4 Headline PBIT (as above) 313.9 324.1 376.6 Attributable tax expense (78.8) (67.9) (114.0) Depreciation of property, plant and equipment1 17.7 36.5 41.7 Profit after taxation 188.9 137.8 248.4 Amortisation of other intangible assets1 8.4 18.0 16.2 Headline EBITDA (including depreciation Goodwill impairment on classification off right-o -use assets) 340.0 378.6 434.5 as held for sale1 (94.5) – – Depreciation of right-of-use assets1 16.3 – – Gain on sale of discontinued operations 73.8 – – Headline EBITDA 356.3 378.6 434.5 Attributable tax expense on sale of discontinued operations (157.4) – – Note 1 Under IFRS 5, non-current assets are not depreciated or amortised whilst classified as held for Net gain attributable to discontinued operations 10.8 137.8 248.4 sale. This means that there is no depreciation or amortisation recognised for the Kantar group from 9 July 2019.

Attributable to Reconciliation of profit before taxation to headline PBT and headline earnings: Equity holders of the parent (3.8) 126.4 237.1 Non-controlling interests 14.6 11.4 11.3 2019 2018 2017 10.8 137.8 248.4 £m £m £m Profit before taxation 267.7 205.7 362.4 Note 1 Goodwill impairment of £94.5 million arose from the assessment of fair value less costs to sell Amortisation and impairment of acquired intangible assets1 14.1 78.2 57.1 under IFRS 5. (Gains)/losses on disposal of investments and subsidiaries (4.7) 2.4 (30.3) For the year ended 31 December 2019, the Kantar group contributed Investment write downs – – 4.2 £322.9 million (2018: £292.5 million, 2017: £378.4 million) to the Group’s net Restructuring and transformation costs 14.0 36.8 – operating cash flows, paid £53.2 million (2018: £59.5 million, 2017: £67.8 million) 1 in respect of investing activities and paid £27.2 million (2018: £7.9 million, Share of exceptional (gains)/losses of associates (0.3) 0.2 (0.2) 2017: £9.1 million) in respect of financing activities. Revaluation of financial instruments 9.4 (3.5) (18.3) Headline PBT 300.2 319.8 374.9 Reconciliation of revenue to revenue less pass-through costs: Headline tax charge2 (101.1) (98.8) (141.7) Headline non-controlling interests (14.6) (11.4) (11.3) 2019 2018 2017 Headline earnings 184.5 209.6 221.9 £m £m £m Revenue 2,387.5 2,555.7 2,657.8 Notes 1 Under IFRS 5, non-current assets are not amortised whilst classified as held for sale. In addition, Data collection pass-through costs (580.9) (604.8) (632.1) when an associate is classified as held for sale, equity accounting will cease. This means that Revenue less pass-through costs 1,806.6 1,950.9 2,025.7 there is no amortisation or share of results of associates recognised for the Kantar group from 9 July 2019. 2  Headline tax consists of the attributable tax expense of £78.8 million (2018: £67.9 million, 2017: Reconciliation of operating profit to headline operating profit: £114.0 million) excluding £22.1 million (2018: £17.2 million, 2017: £13.2 million) tax credit in relation to the amortisation of acquired intangible assets, £1.9 million (2018: £11.0 million, 2017: £nil) tax credit relating to restructuring and transformation costs, £1.7 million (2018: £nil, 2017: £nil) deferred tax 2019 2018 2017 charge relating to interests in associates and joint ventures and in prior years, a tax credit in £m £m £m relation to the impact of the US tax reform (2018: £2.7 million, 2017: £14.5 million). Operating profit 284.3 193.5 330.3 Amortisation and impairment of acquired Further details of these alternative measures of performance can be found in intangible assets1 14.1 78.2 57.1 note 32. (Gains)/losses on disposal of investments and subsidiaries (4.7) 2.4 (30.3) Investment write downs – – 4.2 Restructuring and transformation costs 14.0 36.8 – Headline operating profit 307.7 310.9 361.3

Note 1 Under IFRS 5, non-current assets are not amortised whilst classified as held for sale. This means that there is no amortisation recognised for the Kantar group from 9 July 2019.

160 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

The gain on sale of discontinued operations disposed by 31 December 2019 is The major classes of assets and liabilities comprising the operations classified calculated as follows: as held for sale at 31 December 2019 are as follows:

2019 2019 £m £m Intangible assets (including goodwill) 2,410.0 Non -current assets Property, plant and equipment 115.7 Intangible assets: Right-of-use assets 103.5 Goodwill 155.4 Interests in associates and joint ventures 92.3 Other 5.9 Other investments 11.5 Property, plant and equipment 12.8 Deferred tax assets 44.1 Right-of-use assets 25.7 Corporate income tax recoverable 49.8 Interests in associates and joint ventures 4.6 Trade and other receivables 748.8 Other investments 0.6 Cash and cash equivalents 324.9 Deferred tax assets 5.9 Trade and other payables (839.8) Trade and other receivables 2.6 Corporate income tax payable (48.2) 213.5 Lease liabilities (106.3) Current assets Deferred tax liabilities (98.6) Corporate income tax recoverable 15.9 Provisions for post-employment benefits (26.7) Trade and other receivables 189.4 Provisions for liabilities and charges (22.4) Cash and short-term deposits 66.5 Net assets 2,758.6 271.8

Non-controlling interests (19.1) Total assets classified as held for sale 485.3 Net assets excluding non-controlling interests 2,739.5 Current liabilities Consideration received in cash and cash equivalents 2,352.1 Trade and other payables (130.4) Re-investment in equity stake1 231.7 Corporate income tax payable (3.8) Transaction costs (56.1) Bank overdrafts (0.2) Deferred consideration2 1.6 Short-term lease liabilities (3.9) Total consideration received 2,529.3 (138.3) Non -current liabilities Loss on sale before exchange adjustments (210.2) Trade and other payables (1.3) Exchange adjustments recycled to the income statement 284.0 Deferred tax liabilities (1.2) Gain on sale of discontinued operation 73.8 Provisions for post-employment benefits (8.5) Provisions for liabilities and charges (0.6) Notes 1 Re-investment in equity stake represents the value of the Group’s 40% stake in the new Kantar Long-term lease liabilities (20.5) group as part of the disposal. (32.1) 2  Deferred consideration is made up of £79.6 million expected to be received in future periods on the satisfaction of certain conditions and the deferral of £78.0 million consideration against services the Group will supply to Kantar on favourable terms in the future. The conditions expected to be Total liabilities associated with assets classified as held for sale (170.4) met in the future include the settlement of ongoing legal cases, realisation of the value of certain investments and the utilisation of certain tax losses and allowances. There was uncertainty at the Net assets of disposal group 314.9 date of disposal in regard to the ultimate resolution of these items and estimates of amounts due to be received were required to be made; there were no individually material estimates. Future On 27 February 2020, the second stage of the Kantar transaction completed, services provided by the Group to Kantar arose through the negotiation of Transition Service Arrangements, as is customary for a disposal of this magnitude. The Group will support Kantar for consisting of approximately 4% of the Kantar Group, with cash consideration a period of up to 4 years, primarily in the area of IT, on terms which are favourable to the disposal received of £136.7 million. The remaining stages of the transaction are group. As such, an element of consideration has been deferred and will be recognised as the expected to complete in 2020. services are provided.

WPP ANNUAL REPORT 2019 161 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. LEASES The maturity of lease liabilities at 31 December 2019 were as follows: The movements in the year ended 31 December 2019 were as follows:

Land and Plant and 2019 buildings machinery Total £m Right -of-use assets £m £m £m Period ending 31 December 1 January 2019 1,862.5 32.6 1,895.1 2020 385.9 Additions 348.1 16.5 364.6 2021 384.0 1 Transfers to net investment in subleases (37.6) – (37.6) 2022 335.4 Disposals (31.0) (0.6) (31.6) 2023 283.0 Depreciation of right-of-use assets (301.5) (16.4) (317.9) 2024 220.5 Transfer to disposal group classified Later years 1,393.7 as held for sale (134.4) (3.7) (138.1) 3,002.5 31 December 2019 1,706.1 28.4 1,734.5 Effect of discounting (752.8) Note Lease liability at 31 December 2019 2,249.7 1 The sublease of certain office space is classified as a finance lease and relates primarily to Kantar Short-term lease liability 302.2 business units that were sold. The Company de-recognised the right-of-use asset (to the extent that it is subject to the sublease) and recognised the net investment in subleases, which is Long-term lease liability 1,947.5 included within trade and other receivables. No other disclosures are deemed necessary as it is not material. The total committed future cash flows for leases not yet commenced at 31 December 2019 is £558.0 million.

Land and Plant and The Group does not face a significant liquidity risk with regard to its lease buildings machinery Total Lease liabilities £m £m £m liabilities. Refer to note 26 for management of liquidity risk. 1 January 2019 2,294.4 31.8 2,326.2 14. INTANGIBLE ASSETS Additions 325.9 12.3 338.2 GOODWILL Interest expense related to lease liabilities 101.5 1.2 102.7 The movements in 2019 and 2018 were as follows: Disposals (27.5) (0.2) (27.7) Repayment of lease liabilities (including interest) (326.2) (14.9) (341.1) £m Transfer to disposal group classified Cost as held for sale (144.7) (3.9) (148.6) 1 January 2018 13,675.3 31 December 2019 2,223.4 26.3 2,249.7 Additions1 154.4 The following table shows the breakdown of the lease expense between Revision of earnout estimates (68.3) amounts charged to operating profit and amounts charged to finance costs: Exchange adjustments 368.1 31 December 2018 14,129.5 2019 Additions1 8.5 Continuing operations £m Revision of earnout estimates (14.3) Depreciation of right-of-use assets: Disposals (18.6) Land and buildings (286.5) Transfer to disposal group classified as held for sale (2,729.1) Plant and machinery (15.1) Exchange adjustments (419.9) Short-term lease expense (83.8) 31 December 2019 10,956.1 Low-value lease expense (2.9) Variable lease expense (74.2) Accumulated impairment losses and write-downs Sublease income 17.5 1 January 2018 722.4 Charge to operating profit (445.0) Impairment losses for the year 183.9 Interest expense related to lease liabilities (99.7) Exchange adjustments 20.4 Charge to profit before taxation for leases (544.7) 31 December 2018 926.7 Impairment on classification as held for sale2 70.9 Variable lease payments primarily include real estate taxes and insurance costs. Impairment losses for the year 47.7 Transfer to disposal group classified as held for sale (230.6) Exchange adjustments (29.3) 31 December 2019 785.4

Net book value 31 December 2019 10,170.7 31 December 2018 13,202.8 1 January 2017 12,952.9

Notes 1 Additions represent goodwill arising on the acquisition of subsidiary undertakings including the effect of any revisions to fair value adjustments that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. The effect of such revisions was not material in either year presented. 2  Goodwill impairment of £70.9 million arose from the assessment of fair value less costs to sell of the Kantar group on classification as held for sale under IFRS 5.

162 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

OTHER INTANGIBLE ASSETS Cash-generating units with significant goodwill and brands with an indefinite The movements in 2019 and 2018 were as follows: useful life as at 31 December are:

Brands Brands with an with an Goodwill indefinite useful life indefinite Acquired 2019 2018 2019 2018 useful life intangibles Other Total £m £m £m £m £m £m £m £m GroupM 2,936.0 2,942.9 – – Cost Kantar – 2,522.9 – – 1 January 2018 1,081.3 2,547.8 411.5 4,040.6 Wunderman Thompson 2,138.9 2,118.8 409.7 424.8 Additions – – 60.4 60.4 VMLY&R 901.0 930.4 199.1 206.6 Disposals – (0.9) (37.3) (38.2) Ogilvy 762.9 618.7 211.1 219.1 New acquisitions – 40.3 – 40.3 Burson Cohn & Wolfe 741.4 714.0 130.2 135.4 Other movements1 – 2.9 (7.4) (4.5) Other 2,690.5 3,355.1 128.1 146.9 Exchange adjustments 51.5 19.9 10.1 81.5 Total goodwill 10,170.7 13,202.8 1,078.2 1,132.8 31 December 2018 1,132.8 2,610.0 437.3 4,180.1 Additions – – 43.2 43.2 Other goodwill represents goodwill on a large number of cash-generating Disposals – (3.4) (41.0) (44.4) units, none of which is individually significant in comparison to the total New acquisitions – 3.5 – 3.5 carrying value of goodwill. Other movements – (1.4) (1.4) Exchange adjustments (41.4) (28.2) (9.9) (79.5) Separately identifiable brands with an indefinite life are carried at historical Transfer to disposal group classified cost in accordance with the Group’s accounting policy for intangible assets. as held for sale – (979.0) (115.9) (1,094.9) The carrying values of the other brands with an indefinite useful life are not 31 December 2019 1,091.4 1,602.9 312.3 3,006.6 individually significant in comparison with the total carrying value of brands with an indefinite useful life. Amortisation and impairment 1 January 2018 – 1,718.7 303.5 2,022.2 Acquired intangible assets at net book value at 31 December 2019 include Charge for the year – 275.8 38.7 314.5 brand names of £218.6 million (2018: £361.2 million), customer-related Disposals – (0.7) (27.3) (28.0) intangibles of £100.6 million (2018: £220.6 million), and other assets (including Other movements – – (1.9) (1.9) proprietary tools) of £4.4 million (2018: £13.0 million). Exchange adjustments – 21.4 9.9 31.3 The total amortisation and impairment of acquired intangible assets of 31 December 2018 – 2,015.2 322.9 2,338.1 £121.5 million (2018: £201.8 million) includes an impairment charge of Charge for the year 13.2 116.8 29.6 159.6 £26.5 million (2018: £89.1 million) comprising £21.4 million in regard to certain Disposals – (1.6) (37.7) (39.3) brand names that are no longer in use, including £13.2 million for brands with Other movements – – 2.6 2.6 an indefinite life and £5.1 million in regard to customer relationships where Exchange adjustments – (15.2) (9.1) (24.3) the underlying clients have been lost. £13.2 million of the impairment charge Transfer to disposal group classified relates to the Public Relations segment, £13.0 million of the impairment charge as held for sale – (835.9) (63.0) (898.9) relates to the Global Integrated Agencies segment, and £0.3 million relates 31 December 2019 13.2 1,279.3 245.3 1,537.8 to the Specialist Agencies segment. In addition, the total amortisation and impairment of acquired intangible assets includes £5.6 million (2018: Net book value £3.7 million) in relation to associates. 31 December 2019 1,078.2 323.6 67.0 1,468.8 31 December 2018 1,132.8 594.8 114.4 1,842.0 In accordance with the Group’s accounting policy, the carrying values of 1 January 2018 1,081.3 829.1 108.0 2,018.4 goodwill and intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or changes in circumstances Note 1 Other movements in acquired intangibles include revisions to fair value adjustments arising on the indicate that the asset might be impaired. acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations.

WPP ANNUAL REPORT 2019 163 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. INTANGIBLE ASSETS CONTINUED Changes in our business activities or structure may also result in additional The impairment review is undertaken annually on 30 September. The goodwill changes to the level of testing in future periods. Further, future events could impairment charge of £47.7 million (2018: £183.9 million) relates to a number of cause the Group to conclude that impairment indicators exist and that the under-performing businesses in the Group. In certain markets, the impact of asset values associated with a given operation have become impaired. The local economic conditions and trading circumstances on these businesses was recoverable amount of goodwill represents valuations as at 31 December 2019 sufficiently severe to indicate impairment to the carrying value of goodwill. and does not consider the impact of the emergence and spread of the In 2018, the goodwill impairment charge primarily relates to a charge of Covid-19 virus. Given the adverse impact of the Covid-19 pandemic on the £148.0 million on VMLY&R with the remaining £35.9 million relating to a number global economy and the likely revenue declines that are expected as a result, of under-performing businesses in the Group. there is an increased likelihood of impairments to goodwill and other indefinite lived intangible assets in future reporting periods. At the current time, given Under IFRS, an impairment charge is required for both goodwill and other the level of uncertainty, such impact has not been quantified and any resulting indefinite-lived assets when the carrying amount exceeds the "recoverable impairment loss could have a material impact on the Group’s financial amount", defined as the higher of fair value less costs to sell and value in use. condition and results of operations. The review assessed whether the carrying value of goodwill and intangible assets with indefinite useful lives was supported by the value in use Historically our impairment losses have resulted from a specific event, determined as the net present value of future cash flows. condition or circumstance in one of our companies, such as the loss of a significant client. As a result, changes in the assumptions used in our Due to a significant number of cash-generating units, the impairment test impairment model have not had a significant effect on the impairment was performed in two steps. In the first step, the recoverable amount was charges recognised and a reasonably possible change in assumptions calculated for each cash generating unit using a conservative pre-tax discount would not lead to a significant impairment. The carrying value of goodwill rate of 8.5% (2018: 9.0%), and assumed a long-term growth rate of 3.0% and other intangible assets will continue to be reviewed at least annually (2018: 3.0%). The pre-tax discount rate of 8.5% was above the range of rates for impairment and adjusted down to the recoverable amount if required. calculated for each of the global networks and for smaller cash-generating units that operate primarily in a particular region where we calculated a 15. PROPERTY, PLANT AND EQUIPMENT discount rate to be higher than 8.5%, that higher discount rate was used The movements in 2019 and 2018 were as follows: in the impairment test. Management have made the judgement that the long-term growth rate does not exceed the long-term average growth Fixtures, rate for the industry. Freehold Leasehold fittings and Computer Land buildings buildings equipment equipment Total £m £m £m £m £m £m The recoverable amount was then compared to the carrying amount. Cost Cash-generating units where the recoverable amount exceeded the carrying 1 January 2018 37.1 118.8 1,081.8 377.2 703.0 2,317.9 amount by a considerable margin were not considered to be impaired. Additions – 17.7 161.4 49.9 85.8 314.8 Those cash-generating units where the recoverable amount did not exceed New acquisitions – 0.1 0.9 1.2 0.9 3.1 the carrying amount or where the recoverable amount exceeded the carrying Disposals – – (83.5) (62.9) (109.3) (255.7) amount by less than 25% were then further reviewed in the second step. Exchange adjustments – (1.1) 41.8 9.9 10.0 60.6 In the second step, the cash-generating units were retested for impairment 31 December 2018 37.1 135.5 1,202.4 375.3 690.4 2,440.7 using more specific assumptions. This included using a cash-generating unit Additions – 33.7 158.5 35.0 67.7 294.9 specific pre-tax discount rate and management forecasts for a projection New acquisitions – – – 0.1 – 0.1 period of up to five years, followed by an assumed long-term growth rate Disposals – (109.0) (167.3) (68.3) (76.3) (420.9) of 3.0% (2018: 3.0%). If the recoverable amount using the more specific Transfer to disposal assumptions did not exceed the carrying value of a cash-generating unit, group classified as held for sale (2.8) (17.1) (98.1) (115.2) (231.5) (464.7) an impairment charge was recorded. Exchange adjustments – (16.9) (46.7) (14.5) (26.4) (104.5) 31 December 2019 34.3 26.2 1,048.8 212.4 423.9 1,745.6 Pre-tax discount rates were calculated for the geographic regions in which the cash-generating units operate based on market assessments of the weighted average cost of capital. These assessments considered the time-value of Depreciation money and risks specific to the asset for which the future cash flow estimates 1 January 2018 – 28.5 526.1 236.9 546.9 1,338.4 had not been adjusted, giving a range of pre-tax discount rates from 4.1% to Charge for the year – 3.1 91.5 44.4 86.1 225.1 13.6% (2018: 6.2% to 16.3%). Disposals – – (74.6) (58.0) (107.9) (240.5) Exchange adjustments – (4.5) 24.3 6.4 8.5 34.7 Discount rates for each of the cash generating units that operate globally 31 December 2018 – 27.1 567.3 229.7 533.6 1,357.7 were based on a weighting of the regional rates by its geographic distribution Charge for the year – 1.5 79.9 36.3 67.8 185.5 of cash flows, ranging from 6.3% to 7.4% (2018: 8.0% to 8.7%). The cash- Disposals – (7.2) (129.9) (59.9) (74.5) (271.5) generating units were initially tested for impairment in the first step using Transfer to disposal a conservative discount rate of 8.5% (2018: 9.0%). group classified as held for sale – (15.6) (56.1) (81.7) (192.6) (346.0) Our approach in determining the recoverable amount utilises a discounted Exchange adjustments – (1.6) (17.9) (13.2) (23.4) (56.1) cash flow methodology, which necessarily involves making numerous 31 December 2019 – 4.2 443.3 111.2 310.9 869.6 estimates and assumptions regarding revenue growth, operating margins, appropriate discount rates and working capital requirements. The key Net book value assumptions used for estimating cash flow projections in the Group’s 31 December 2019 34.3 22.0 605.5 101.2 113.0 876.0 impairment testing are those relating to revenue growth and operating 31 December 2018 37.1 108.4 635.1 145.6 156.8 1,083.0 margin. The key assumptions take account of the businesses’ expectations 1 January 2018 37.1 90.3 555.7 140.3 156.1 979.5 for the projection period. These expectations consider the macroeconomic environment, industry and market conditions, the unit’s historical performance At 31 December 2019, capital commitments contracted, but not provided and any other circumstances particular to the unit, such as business strategy for in respect of property, plant and equipment, were £165.0 million and client mix. (2018: £28.4 million). The increase is due to a number of significant property developments in North America, UK and Western Continental Europe. These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied in determining the level of cash-generating unit identified for impairment testing and the criteria used to determine which assets should be aggregated. A difference in testing levels could affect whether an impairment is recorded and the extent of impairment loss.

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16. INTERESTS IN ASSOCIATES, JOINT VENTURES AND OTHER The Group’s principal associates and joint ventures at 31 December 2019 INVESTMENTS included: The movements in 2019 and 2018 were as follows: % Country of Interests in owned incorporation associates Barrows Design and Manufacturing (Pty) Limited 35.0 South Africa and joint Other Dat Viet VAC Media Corporation 30.0 Vietnam ventures investments £m £m GIIR Inc. 30.0 Korea 1 January 2018 1,065.2 1,153.5 Haworth Marketing & Media Company 49.0 USA Additions 16.7 35.0 High Co SA 34.1 France Share of results of associate undertakings 43.5 – Joye Media SL1 22.5 Spain Dividends (49.7) – Nanjing Yindu Ogilvy Advertising Co. Ltd 49.0 China Other movements 1.2 – Smollan Holdings (Pty) Ltd 24.8 South Africa Reclassification from other investments to associates 0.3 (0.3) Summer (BC) JVCo S.à r.l.2 40.0 Luxembourg Exchange adjustments 12.9 – Summer (BC) US JVCo SCSp2 40.0 Luxembourg

Disposals (304.0) (341.7) Notes Reclassification to subsidiaries 16.9 – 1 Representing the Group's interest in Imagina. Revaluation of other investments through profit or loss – 68.1 2 Representing the Group's interest in Kantar split between the United States and rest of world. Revaluation of other investments through other comprehensive income – (247.9) The market value of the Group’s shares in its principal listed associate Amortisation of other intangible assets (4.2) – undertakings at 31 December 2019 was as follows: GIIR Inc: £21.2 million, Write-downs (2.0) – and High Co SA: £39.4 million (2018: GIIR Inc: £26.3 million and High Co SA: 31 December 2018 796.8 666.7 £30.3 million). The carrying value (including goodwill and other intangibles) Additions 236.6 18.3 of these equity interests in the Group’s consolidated balance sheet at 31 December 2019 was as follows: GIIR Inc: £37.7 million and High Co SA: Share of results of associate undertakings 21.2 – £35.4 million (2018: GIIR Inc: £46.8 million and High Co SA: £37.1 million). Dividends (33.3) – Other movements 1.2 – Where the market value of the Group’s listed associates is less than the Exchange adjustments (35.5) – carrying value, an impairment review is performed utilising the discounted Disposals (51.5) (42.3) cash flow methodology discussed in note 14, which represents the value Reclassification to subsidiaries (0.3) – in use. Revaluation of other investments through profit or loss – 9.1 Revaluation of other investments through other The Group’s investments in its principal associate undertakings are comprehensive income – (141.4) represented by ordinary shares. Amortisation of other intangible assets (5.6) – Transfer to disposal group classified as held for sale (109.1) (12.1) SUMMARISED FINANCIAL INFORMATION Write-downs (7.5) – The following tables present a summary of the aggregate financial 31 December 2019 813.0 498.3 performance and net asset position of the Group’s associate undertakings and joint ventures. These have been estimated and converted, where appropriate, The investments included above as "other investments" represent investments to an IFRS presentation based on information provided by the relevant in equity securities that present the Group with opportunity for return through companies at 31 December 2019. dividend income and trading gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. 2019 2018 2017 For unlisted securities, where market value is not available, the Group has £m £m £m estimated relevant fair values on the basis of publicly available information Income statement from outside sources. Revenue 3,619.1 3,685.8 3,800.8 Operating profit 365.6 378.4 440.4 The carrying values of the Group’s associates and joint ventures are reviewed Profit before taxation (385.9) 194.7 381.9 for impairment in accordance with the Group’s accounting policies. Profit for the year (429.6) 118.1 312.5

The fair value of other investments represents valuations as at 31 December Balance sheet 2019 and does not consider the impact of the emergence and spread of the Assets 8,855.1 2,940.9 3,192.9 Covid-19 virus. Liabilities (6,765.7) (1,570.6) (1,633.7) Net assets 2,089.4 1,370.3 1,559.2

The application of equity accounting is ordinarily discontinued when the investment is reduced to zero and additional losses are not provided for unless the Group has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.

At 31 December 2019, capital commitments contracted, but not provided for, in respect of interests in associates and other investments were £21.8 million (2018: £31.4 million).

WPP ANNUAL REPORT 2019 165 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. DEFERRED TAX If it is probable that some portion of these assets will not be realised, then no The Group's deferred tax assets and liabilities are measured at the end of each asset is recognised in relation to that portion. period in accordance with IAS 12 Income Taxes. The recognition of deferred tax assets is determined by reference to the Group's estimate of recoverability, If market conditions improve and future results of operations exceed our using models where appropriate to forecast future taxable profits. current expectations, our existing recognised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions Deferred tax assets have only been recognised for territories where the Group deteriorate further or future results of operations are less than expected, considers that it is probable that all or a portion of the deferred tax assets will future assessments may result in a determination that some or all of the be realised. The main factors that we consider include: deferred tax assets are not realisable. As a result, all or a portion of the deferred tax assets may need to be reversed. –– the future earnings potential determined through the use of internal forecasts; –– the cumulative losses in recent years; –– the various jurisdictions in which the potential deferred tax assets arise; –– the history of losses carried forward and other tax assets expiring; –– the timing of future reversal of taxable temporary differences; –– the expiry period associated with the deferred tax assets; and –– the nature of the income that can be used to realise the deferred tax asset.

Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax balances for financial reporting purposes:

As As Gross Offset reported Gross Offset reported 2019 2019 2019 2018 2018 2018 £m £m £m £m £m £m Deferred tax assets 430.9 (243.0) 187.9 412.0 (259.0) 153.0 Deferred tax liabilities (622.8) 243.0 (379.8) (738.5) 259.0 (479.5) (191.9) – (191.9) (326.5) – (326.5)

The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2019 and 2018:

Accounting Retirement Property, Other Deferred provisions benefit plant and Tax losses Share-based Restructuring temporary compensation and accruals obligations equipment and credits payments provisions differences Total £m £m £m £m £m £m £m £m £m 1 January 2018 53.5 84.9 75.6 68.4 72.7 33.0 5.8 17.9 411.8 Acquisition of subsidiaries – – – – – – – 2.0 2.0 Credit/(charge) to income 4.7 13.0 (11.2) (20.6) (8.9) (15.3) 10.7 11.0 (16.6) Charge to other comprehensive income – – (0.2) – – – – – (0.2) Charge to equity – – – – – (1.6) – – (1.6) Exchange differences 3.4 3.5 4.3 0.1 3.3 0.7 0.8 0.5 16.6 31 December 2018 61.6 101.4 68.5 47.9 67.1 16.8 17.3 31.4 412.0 (Charge)/credit to income (1.7) 10.2 6.7 19.4 24.2 2.9 12.5 (16.6) 57.6 Charge to other comprehensive income – – (3.2) – – – – – (3.2) Credit to equity – – – 27.8 – 3.1 – – 30.9 Transfer to disposal group classified as held for sale (4.2) (19.2) (12.3) (13.6) (3.0) (0.7) (3.4) 0.1 (56.3) Exchange differences (2.2) (5.0) (2.2) 3.2 (2.0) (0.6) (0.6) (0.7) (10.1) 31 December 2019 53.5 87.4 57.5 84.7 86.3 21.5 25.8 14.2 430.9

Other temporary differences comprise a number of items including tax deductible goodwill, none of which is individually significant to the Group's consolidated balance sheet. At 31 December 2019 the balance related to temporary differences in relation to revenue adjustments, tax deductible goodwill, fair value adjustments, and other temporary differences.

166 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2019 and 2018:

Brands Property, Other and other Associate plant and Financial temporary intangibles earnings Goodwill equipment instruments differences Total £m £m £m £m £m £m £m 1 January 2018 489.2 21.6 140.4 21.2 36.2 56.6 765.2 Acquisition of subsidiaries 10.7 – – – – – 10.7 (Credit)/charge to income (68.8) (3.9) 31.8 (0.3) (0.9) (20.7) (62.8) Charge to other comprehensive income – – – – – 0.5 0.5 Exchange differences 7.5 (0.1) 10.1 1.3 4.6 1.5 24.9 31 December 2018 438.6 17.6 182.3 22.2 39.9 37.9 738.5 Acquisition of subsidiaries 0.8 – – – – – 0.8 (Credit)/charge to income (31.2) 68.6 10.3 (22.2) (0.7) (6.7) 18.1 Credit to other comprehensive income – – – – – (9.6) (9.6) Transfer to disposal group classified as held for sale (46.6) (7.9) (51.7) – – 0.6 (105.6) Exchange differences (9.3) (1.8) (5.5) – (2.3) (0.5) (19.4) 31 December 2019 352.3 76.5 135.4 – 36.9 21.7 622.8

At the balance sheet date, the Group has gross tax losses and other temporary At the balance sheet date, the aggregate amount of the temporary differences differences of £6,475.6 million (2018: £6,638.6 million) available for offset in relation to the investment in subsidiaries for which deferred tax liabilities have against future profits. Deferred tax assets have been recognised in respect of not been recognised was £2,165.3 million (2018: £1,768.5 million). No liability the tax benefit of £1,856.6 million (2018: £1,763.4 million) of such tax losses and has been recognised in respect of these differences because the Group is in a other temporary differences. No deferred tax asset has been recognised in position to control the timing of the reversal of the temporary differences and respect of the remaining £4,619.0 million (2018: £4,875.2 million) of losses and the Group considers that it is probable that such differences will not reverse in other temporary differences as the Group considers that there will not be the foreseeable future. enough taxable profits in the entities concerned such that any additional asset could be considered recoverable. Included in the total unrecognised temporary differences are losses of £60.7 million (2018: £46.4 million) that will expire within 1-10 years, and £4,437.6 million (2018: £4,572.6 million) of losses that may be carried forward indefinitely.

WPP ANNUAL REPORT 2019 167 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18. TRADE AND OTHER RECEIVABLES 2019 2018 The following are included in trade and other receivables: £m £m Bad debt provisions 2019 2018 At beginning of year 116.6 91.3 £m £m New acquisitions 5.0 1.5 Amounts falling due within one year Charged to the income statement 45.4 66.7 Trade receivables (net of bad debt provision) 7,007.6 8,062.2 Released to the income statement (19.0) (11.6) Work in progress 349.5 366.5 Exchange adjustments (4.1) 2.1 VAT and sales taxes recoverable 212.7 264.2 Transfer to disposal group classified as held for sale (8.9) – Utilisations and other movements (23.3) (33.4) Prepayments 287.1 287.3 At end of year 111.7 116.6 Accrued income 3,292.7 3,541.2 Fair value of derivatives 1.4 1.3 The allowance for bad and doubtful debts is equivalent to 1.6% (2018: 1.4%) Other debtors 671.3 578.8 of gross trade accounts receivables. 11,822.3 13,101.5 Impairment losses on work in progress and accrued income were immaterial The ageing of trade receivables and other financial assets by due date is for the years presented. as follows: The Group considers that the carrying amount of trade and other receivables Days past due approximates their fair value. Carrying amount at 181 Greater 19. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN 31 December Not past 0-30 31-90 91-180 days- than ONE YEAR 2019 due days days days 1 year 1 year 2019 £m £m £m £m £m £m £m The following are included in trade and other payables falling due within one year: Trade receivables 7,007.6 5,553.3 934.9 341.0 92.1 22.4 63.9 Other financial 2019 2018 assets 582.5 357.6 129.9 48.3 16.2 5.2 25.3 £m £m 7,590.1 5,910.9 1,064.8 389.3 108.3 27.6 89.2 Trade payables 10,112.1 10,524.3 Deferred income 1,024.6 1,253.6 Days past due Payments due to vendors (earnout agreements) 142.4 148.2 Carrying Liabilities in respect of put option agreements with amount at 181 Greater vendors 75.4 36.8 31 December Not past 0-30 31-90 91-180 days- than Fair value of derivatives 1.5 2.6 2018 due days days days 1 year 1 year 2018 £m £m £m £m £m £m £m Share repurchases – close period commitments1 252.3 – Trade receivables 8,062.2 5,873.7 1,370.7 549.1 128.3 75.6 64.8 Other creditors and accruals 2,578.5 3,072.9 Other financial 14,186.8 15,038.4 assets 551.7 424.9 61.3 14.2 8.6 7.7 35.0 Note 8,613.9 6,298.6 1,432.0 563.3 136.9 83.3 99.8 1 During 2019, the Company entered into an arrangement with a third party to conduct share buybacks on its behalf in the close period commencing on 2 January 2020 and ending on 27 Other financial assets are included in other debtors. February 2020, in accordance with UK listing rules. The commitment resulting from this agreement constitutes a liability at 31 December 2019, which is included in Trade and other Past due amounts are not impaired where collection is considered likely. payables: amounts falling due within one year and has been recognised as a movement in equity.

2019 2018 The Group considers that the carrying amount of trade and other payables £m £m approximates their fair value. Amounts falling due after more than one year Prepayments 2.2 3.0 Accrued income – 16.5 Fair value of derivatives – 8.4 Other debtors 135.4 152.1 137.6 180.0

The Group has applied the practical expedient permitted by IFRS 15 to not disclose the transaction price allocated to performance obligations unsatisfied (or partially unsatisfied) as of the end of the reporting period as contracts typically have an original expected duration of a year or less.

168 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

20. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE AFTER 21. BANK OVERDRAFTS, BONDS AND BANK LOANS MORE THAN ONE YEAR Amounts falling due within one year: The following are included in trade and other payables falling due after more than one year: 2019 2018 £m £m 2019 2018 Bank overdrafts 235.7 442.0 £m £m Corporate bonds and bank loans 225.6 583.1 Payments due to vendors (earnout agreements) 111.4 266.5 461.3 1,025.1 Liabilities in respect of put option agreements with vendors 151.4 205.2 Fair value of derivatives 21.2 14.2 The Group considers that the carrying amount of bank overdrafts Other creditors and accruals 199.3 355.5 approximates their fair value. 483.3 841.4 Amounts falling due after more than one year: The Group considers that the carrying amount of trade and other payables approximates their fair value. 2019 2018 £m £m Corporate bonds and bank loans 4,047.3 5,634.8 The following tables set out payments due to vendors, comprising contingent consideration and the Directors’ best estimates of future The Group estimates that the fair value of corporate bonds is £4,439.8 million earnout-related obligations: at 31 December 2019 (2018: £5,965.7 million). The fair values of the corporate bonds are based on quoted market prices. 2019 2018 £m £m Within one year 142.4 148.2 The Group considers that the carrying amount of bank loans of £110.4 million Between one and two years 36.9 140.2 (2018: £186.8 million) approximates their fair value. Between two and three years 37.5 38.5 The corporate bonds, bank loans and overdrafts included within liabilities fall Between three and four years 14.8 50.3 due for repayment as follows: Between four and five years 9.7 20.4 Over five years 12.5 17.1 2019 2018 £m £m 253.8 414.7 Within one year 461.3 1,025.1 Between one and two years 96.4 423.8 2019 2018 Between two and three years 590.4 761.0 £m £m Between three and four years 632.1 609.8 At beginning of year 414.7 630.7 Between four and five years 554.3 670.1 Earnouts paid (130.0) (120.2) Over five years 2,174.1 3,170.1 New acquisitions 9.6 48.6 4,508.6 6,659.9 Revision of estimates taken to goodwill (note 14) (14.3) (68.3) Revaluation of payments due to vendors 1.1 (82.6) 22. PROVISIONS FOR LIABILITIES AND CHARGES Transfer to disposal group classified as held for sale (11.5) – The movements in 2019 and 2018 were as follows: Exchange adjustments (15.8) 6.5 At end of year 253.8 414.7 Property Other Total £m £m £m As of 31 December 2019, the potential undiscounted amount of future payments 1 January 2018 52.6 176.4 229.0 that could be required under the earnout agreements for acquisitions completed Charged to the income statement1 72.1 13.9 86.0 in the current year and for all earnout agreements ranges from £nil to £14 million Acquisitions2 0.5 8.3 8.8 (2018: £nil to £179 million) and £nil to £1,110 million (2018: £nil to £1,960 million), Utilised (5.7) (20.1) (25.8) respectively. The decrease in the maximum potential undiscounted amount of Released to the income statement (5.7) (4.6) (10.3) future payments for all earnout agreements is due to earnout arrangements Other movements 2.0 10.9 12.9 that have completed and payments made on active arrangements during the Exchange adjustments 2.9 8.2 11.1 year, disposal related to the Kantar sale and exchange adjustments, partially 31 December 2018 118.7 193.0 311.7 offset by earnout arrangements related to new acquisitions. Charged to the income statement 39.5 7.6 47.1 Acquisitions2 – 0.7 0.7 Utilised (1.2) (12.2) (13.4) Released to the income statement (10.3) (6.9) (17.2) Other movements3 (58.4) 9.2 (49.2) Transfer to disposal group classified as held for sale (6.2) (18.4) (24.6) Exchange adjustments (0.6) (6.7) (7.3) 31 December 2019 81.5 166.3 247.8

Notes 1 Amounts charged to the income statement in 2018 include £50.6 million in regard to transformation costs with respect to the strategic initiative of co-locations in major cities. 2  Acquisitions include £0.7 million (2018: £8.4 million) of provisions arising from revisions to fair value adjustments related to the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. 3  Other movements include transfers of property provisions related to property leases which are now recognised in right-of-use assets, increases of certain property-related liabilities and certain long-term employee benefits.

The Company and various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims will have a material adverse effect on the Group’s financial position or on the results of its operations.

WPP ANNUAL REPORT 2019 169 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. SHARE-BASED PAYMENTS PERFORMANCE SHARE AWARDS (PSA) Charges for share-based incentive plans were as follows: Conditional stock awards made under the PSA are dependent upon annual performance targets, typically based on one or more of: operating profit, 2019 20181 20171 profit before taxation and operating margin. Grants are made in the year Continuing operations £m £m £m following the year of performance measurement, and vest two years after Share-based payments 66.0 78.3 98.3 grant date provided the individual concerned is continually employed by the Note Group throughout this time. 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. LEADERS, PARTNERS AND HIGH POTENTIAL GROUP This scheme makes annual conditional stock awards to approximately 1,500 Share-based payments comprise charges for stock options and restricted key executives of the Group. Vesting is conditional on continued employment stock awards to employees of the Group. over the three-year vesting period.

As of 31 December 2019, there was £140.7 million (2018: £146.0 million) of total VALUATION METHODOLOGY unrecognised compensation cost related to the Group’s restricted stock plans. For all of these schemes, the valuation methodology is based upon fair value That cost is expected to be recognised over an average period of one to on grant date, which is determined by the market price on that date or the two years. application of a Black-Scholes model, depending upon the characteristics of the scheme concerned. The assumptions underlying the Black-Scholes model Further information on stock options is provided in note 28. are detailed in note 28, including details of assumed dividend yields. Market price on any given day is obtained from external, publicly available sources. RESTRICTED STOCK PLANS The Group operates a number of equity-settled share incentive schemes, in MARKET/NON-MARKET CONDITIONS most cases satisfied by the delivery of stock from one of the Group’s ESOP Most share-based plans are subject to non-market performance conditions, Trusts. The most significant current schemes are as follows: such as margin or growth targets, as well as continued employment. EPSP is subject to a number of performance conditions, including TSR, a market- EXECUTIVE PERFORMANCE SHARE PLAN (EPSP) based condition. This scheme is intended to reward and incentivise the most senior executives of the Group. The performance period is five complete financial years, For schemes without market-based performance conditions, the valuation commencing with the financial year in which the award is granted. The vest methodology above is applied and, at each year-end, the relevant accrual for date will usually be in the March following the end of the five-year each grant is revised, if appropriate, to take account of any changes in performance period. Vesting is conditional on continued employment estimate of the likely number of shares expected to vest. throughout the vesting period. For schemes with market-based performance conditions, the probability The 2019 EPSP awards are subject to a relative TSR performance condition, of satisfying these conditions is assessed at grant date through a statistical with a Return on Invested Capital (ROIC) underpin. TSR performance will model (such as the Monte Carlo model) and applied to the fair value. This initial be compared to companies representing the most relevant, listed global valuation remains fixed throughout the life of the relevant plan, irrespective competitors, with performance below median resulting in zero vesting. of the actual outcome in terms of performance. Where a lapse occurs due to Performance between median and upper decile provides for a vesting cessation of employment, the cumulative charge taken to date is reversed. opportunity of between 15% and 100%. The awards will vest subject to a ROIC underpin of an average of 7.5% over the performance period. Movement on ordinary shares granted for significant restricted stock plans: The Compensation Committee has an overriding discretion to determine the extent to which the award will vest. Non- Non- For EPSP awards granted between 2013 and 2018 there are three performance vested vested 31 1 January December criteria, each constituting one-third of the vesting value, and each measured 2019 Granted Lapsed Vested 2019 over this five-year period: number number number number number m m m m m (i) TSR against a comparator group of companies. Threshold performance Executive Performance (equating to ranking in the 50th percentile of the comparator group) will Share Plan (EPSP) 6.7 4.2 (1.3) (0.8) 8.8 result in 20% vesting of the part of the award dependent on TSR. The Performance Share Awards (PSA) 2.3 1.7 (0.4) (1.0) 2.6 maximum vest of 100% will arise if performance ranks in the 90th percentile, with a sliding scale of vesting for performance between Leaders, Partners and High Potential Group 9.1 4.1 (1.9) (2.0) 9.3 threshold and maximum.

Weighted average fair (ii) Headline diluted earnings per share. Threshold performance (7% compound value (pence per share) annual growth) will again result in a 20% vest. Maximum performance of Executive Performance 14% compound annual growth will give rise to a 100% vest, with a sliding Share Plan (EPSP) 1,363p 989p 1,334p 1,265p 1,198p vesting scale for performance between threshold and maximum. Performance Share Awards (PSA) 1,437p 926p 1,210p 1,572p 1,081p (iii) R eturn on equity (ROE). Average annual ROE defined as headline diluted Leaders, Partners and EPS divided by the balance sheet value per share of shareholders’ equity. High Potential Group 1,154p 909p 1,076p 1,551p 974p Threshold performance ranges between 10-14% average annual ROE and maximum performance ranges between 14-18%, with a sliding scale in The total fair value of shares vested for all the Group’s restricted stock plans between. Threshold again gives rise to a 20% vest, 100% for maximum, during the year ended 31 December 2019 was £90.8 million (2018: £107.2 million, with a sliding scale in between. 2017: £114.8 million).

170 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

24. PROVISION FOR POST-EMPLOYMENT BENEFITS For the Group’s pension plans, the plans’ assets are invested with the Companies within the Group operate a large number of pension plans, the objective of being able to meet current and future benefit payment needs forms and benefits of which vary with conditions and practices in the countries while controlling balance sheet volatility and future contributions. Pension concerned. The Group’s pension costs are analysed as follows: plan assets are invested with a number of investment managers, and assets are diversified among equities, bonds, insured annuities, property and cash or 2019 20181 20171 other liquid investments. The primary use of bonds as an investment class is to Continuing operations £m £m £m match the anticipated cash flows from the plans to pay pensions. The Group is Defined contribution plans 154.9 146.7 149.5 invested in high-quality corporate and government bonds which share similar Defined benefit plans charge to operating profit 14.8 14.2 11.8 risk characteristics and are of equivalent currency and term to the plan Pension costs (note 5) 169.7 160.9 161.3 liabilities. Various insurance policies have also been bought historically to Net interest expense on pension plans (note 6) 3.5 3.6 5.4 provide a more exact match for the cash flows, including a match for the 173.2 164.5 166.7 actual mortality of specific plan members. These insurance policies effectively provide protection against both investment fluctuations and longevity risks. Note 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for The strategic target allocation varies among the individual plans. Sale and Discontinued Operations, as described in the accounting policies. Management considers the types of investment classes in which the pension DEFINED BENEFIT PLANS plan assets are invested. The types of investment classes are determined by The pension costs are assessed in accordance with the advice of local economic and market conditions and in consideration of specific asset class risk. independent qualified actuaries. The latest full actuarial valuations for the various pension plans were carried out at various dates in the last three years. Management periodically commissions detailed asset and liability studies These valuations have been updated by the local actuaries to 31 December performed by third-party professional investment advisors and actuaries 2019. Valuations are as at 31 December 2019 and do not consider the impact of that generate probability-adjusted expected future returns on those assets. the emergence and spread of the Covid-19 virus. These studies also project the estimated future pension payments and evaluate the efficiency of the allocation of the pension plan assets into The Group’s policy is to close existing defined benefit plans to new members. various investment categories. This has been implemented across a significant number of the pension plans. At 31 December 2019, the life expectancies underlying the value of the accrued Contributions to funded plans are determined in line with local conditions and liabilities for the main defined benefit pension plans operated by the Group practices. Contributions in respect of unfunded plans are paid as they fall due. were as follows: The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2019 amounted to £37.1 million (2018: £44.9 million, 2017: £68.2 Western All North Continental million). Employer contributions and benefit payments in 2020 are expected to Years life expectancy after age 65 plans America UK Europe Other1 be approximately £25 million. Current pensioners (at age 65) – male 22.2 21.9 23.1 20.8 14.0 (A) ASSUMPTIONS Current pensioners There are a number of areas in pension accounting that involve estimates (at age 65) – female 23.7 23.3 24.1 23.9 17.4 made by management based on advice of qualified advisors. These include Future pensioners establishing the discount rates, rates of increase in salaries and pensions in (current age 45) payment, inflation, and mortality assumptions. The main weighted average – male 23.8 23.4 24.7 23.2 14.0 assumptions used for the actuarial valuations at 31 December are shown in Future pensioners (current age 45) the following table: – female 25.4 24.9 25.9 26.0 17.4

2019 2018 2017 2016 Note % pa % pa % pa % pa 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe. UK Discount rate1 2.0 2.8 2.4 2.5 The life expectancies after age 65 at 31 December 2018 were 22.2 years and 23.9 years for male and female current pensioners (at age 65) respectively, and Rate of increase in salaries2 n/a n/a n/a 3.5 24.0 years and 25.7 years for male and female future pensioners (current age Rate of increase in pensions in payment 4.4 4.3 4.1 4.1 45), respectively. Inflation 2.6 2.8 2.7 2.8 North America In the determination of mortality assumptions, management uses the most 1 Discount rate 3.0 4.1 3.5 3.8 up-to-date mortality tables available in each country. Rate of increase in salaries 3.0 3.0 3.1 3.1 Inflation n/a n/a 4.0 4.0 The following table provides information on the weighted average duration of Western Continental Europe the defined benefit pension obligations and the distribution of the timing of Discount rate1 1.2 2.0 1.9 1.7 benefit payments for the next 10 years. The duration corresponds to the Rate of increase in salaries 2.2 2.3 1.9 2.0 weighted average length of the underlying cash flows. Rate of increase in pensions in payment 1.8 1.2 1.2 1.3 Inflation 1.7 1.7 1.7 1.7 Western All North Continental Asia Pacific, Latin America, Africa & plans America UK Europe Other1 Middle East and Central & Eastern Europe Weighted average duration of the Discount rate1 4.6 5.0 4.2 4.2 defined benefit obligation (years) 11.2 9.1 13.8 12.7 8.5 Rate of increase in salaries 6.1 5.8 5.5 5.9 Expected benefit payments over Inflation 3.7 3.6 4.0 4.0 the next 10 years (£m) Benefits expected to be paid within Notes 12 months 51.4 25.1 15.8 5.8 4.7 1 Discount rates are based on high-quality corporate bond yields. In countries where there is no Benefits expected to be paid in 2021 45.4 24.5 12.6 5.5 2.8 deep market in corporate bonds, the discount rate assumption has been set with regard to the yield on long-term government bonds. Benefits expected to be paid in 2022 46.9 26.0 12.7 5.8 2.4 2 The salary assumptions are no longer applicable to the UK as the plans were either frozen or Benefits expected to be paid in 2023 44.4 22.3 12.9 5.7 3.5 bought out since 2017. Active participants will not accrue additional benefits for future services Benefits expected to be paid in 2024 42.3 20.9 13.0 5.6 2.8 under these plans. Benefits expected to be paid in the next five years 216.1 94.7 67.1 32.6 21.7

Note 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

WPP ANNUAL REPORT 2019 171 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. PROVISION FOR POST-EMPLOYMENT BENEFITS CONTINUED 2019 2018 2017 The following table presents a sensitivity analysis for each significant actuarial £m % £m % £m % assumption showing how the defined benefit obligation would have been Equities 55.5 9.1 76.5 9.1 124.6 13.4 affected by changes in the relevant actuarial assumption that were reasonably Bonds 272.5 44.8 544.9 64.8 520.0 55.9 possible at the balance sheet date. This sensitivity analysis applies to the Insured annuities1 239.1 39.3 90.9 10.8 178.5 19.2 defined benefit obligation only and not to the net defined benefit pension Property 0.7 0.1 0.9 0.1 1.3 0.1 liability in its entirety, the measurement of which is driven by a number of Cash 17.7 2.9 31.1 3.7 9.9 1.1 factors including, in addition to the assumptions below, the fair value of Other 23.0 3.8 96.3 11.5 95.7 10.3 plan assets. Total fair value of assets 608.5 100.0 840.6 100.0 930.0 100.0 Present value of liabilities (767.5) (1,024.0) (1,135.4) The sensitivity analyses are based on a change in one assumption while Deficit in the plans (159.0) (183.4) (205.4) holding all other assumptions constant so that interdependencies between Irrecoverable surplus – (0.9) (0.9) the assumptions are excluded. The methodology applied is consistent with Net liability2 (159.0) (184.3) (206.3) that used to determine the recognised defined benefit obligation. The Plans in surplus 20.6 42.8 43.9 sensitivity analysis for inflation is not shown as it is an underlying assumption to build the pension and salary increase assumptions. Changing the inflation Plans in deficit (179.6) (227.1) (250.2) assumption on its own without changing the salary or pension assumptions Notes will not result in a significant change in pension liabilities. 1 The increase in 2019 from 2018 in the amount of assets held in insured annuities is attributable to the completion of buy-in transactions during 2019 for certain UK plans. The invested assets for Increase/(decrease) in these plans, as at 31 December 2018 consisted of a mixture of equities, bonds, cash and other benefit obligation assets, were transferred to an insurance company and, in accordance with IAS 19, all assets for these plans are now classified as insured annuities. 2019 2018 2 Sensitivity analysis of significant actuarial assumptions £m £m The related deferred tax asset is discussed in note 17. Discount rate All plan assets have quoted prices in active markets with the exception of Increase by 25 basis points: insured annuities and other assets. UK (8.2) (9.8) North America (7.5) (8.8) 2019 2018 2017 Western Continental Europe (3.8) (8.7) Surplus/(deficit) in plans by region £m £m £m Other1 (0.7) (0.7) UK 0.3 33.7 31.5 Decrease by 25 basis points: North America (45.2) (68.7) (89.2) UK 8.5 10.3 Western Continental Europe (79.4) (104.6) (107.7) North America 7.7 9.1 Asia Pacific, Latin America, Africa & Middle East and Western Continental Europe 3.9 9.3 Central & Eastern Europe (34.7) (43.8) (40.0) Other1 0.7 0.7 Deficit in the plans (159.0) (183.4) (205.4) Rate of increase in salaries Some of the Group’s defined benefit plans are unfunded (or largely unfunded) Increase by 25 basis points: by common custom and practice in certain jurisdictions. In the case of these Western Continental Europe 0.8 1.3 unfunded plans, the benefit payments are made as and when they fall due. 1 Other 0.6 0.7 Pre-funding of these plans would not be typical business practice. Decrease by 25 basis points: Western Continental Europe (0.8) (1.2) The following table shows the split of the deficit at 31 December between Other1 (0.6) (0.6) funded and unfunded pension plans. Rate of increase in pensions in payment Increase by 25 basis points: 2019 2018 2017 2019 Present 2018 Present 2017 Present UK 0.7 1.3 Surplus/ value of Surplus/ value of Surplus/ value of Western Continental Europe 1.9 5.3 (deficit) liabilities (deficit) liabilities (deficit) liabilities Decrease by 25 basis points: £m £m £m £m £m £m UK (0.6) (0.8) Funded plans by region Western Continental Europe (1.9) (5.0) UK 0.3 (247.6) 33.7 (290.5) 31.5 (387.5) Life expectancy North America 12.8 (286.2) (4.6) (375.3) (21.4) (385.4) Increase in longevity by one additional year: Western Continental Europe (33.3) (77.6) (35.8) (168.4) (37.9) (173.3) UK 11.7 13.6 Asia Pacific, Latin North America 5.9 5.7 America, Africa & Western Continental Europe 4.3 6.9 Middle East and Central & Eastern Europe (3.6) (20.9) (6.6) (19.7) (4.2) (15.8) Note Deficit/liabilities in the 1 Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe. funded plans (23.8) (632.3) (13.3) (853.9) (32.0) (962.0)

(B) ASSETS AND LIABILITIES Unfunded plans At 31 December, the fair value of the assets in the pension plans, and the by region assessed present value of the liabilities in the pension plans are shown in the North America (58.0) (58.0) (64.1) (64.1) (67.8) (67.8) following table: Western Continental Europe (46.1) (46.1) (68.8) (68.8) (69.8) (69.8) Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe (31.1) (31.1) (37.2) (37.2) (35.8) (35.8) Deficit/liabilities in the unfunded plans (135.2) (135.2) (170.1) (170.1) (173.4) (173.4)

Deficit/liabilities in the plans (159.0) (767.5) (183.4) (1,024.0) (205.4) (1,135.4)

In accordance with IAS 19, plans that are wholly or partially funded are considered funded plans.

172 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

(C) PENSION EXPENSE (E) MOVEMENT IN PLAN ASSETS The following table shows the breakdown of the pension expense between The following table shows an analysis of the movement in the pension plan amounts charged to operating profit and amounts charged to finance costs: assets for each accounting period:

2019 20181 20171 2019 2018 2017 Continuing operations £m £m £m £m £m £m Service cost2 12.9 12.0 9.4 Fair value of plan assets at beginning of year 840.6 930.0 934.2 Administrative expenses 1.9 2.2 2.4 Interest income on plan assets 22.4 26.3 26.6 Charge to operating profit 14.8 14.2 11.8 Return on plan assets (excluding interest income) 16.7 (43.9) 13.4 Net interest expense on pension plans 3.5 3.6 5.4 Employer contributions 37.1 44.9 68.2 Charge to profit before taxation for defined Benefits paid1 (140.8) (75.6) (79.7) benefit plans 18.3 17.8 17.2 (Loss)/gain due to exchange rate movements (15.7) 23.0 (28.7) Notes Settlement payments2 (47.4) (70.4) (1.2) 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Administrative expenses (2.1) (3.4) (3.1) Sale and Discontinued Operations, as described in the accounting policies. Transfer to disposal group classified as held for sale (111.1) – – 2 Includes current service cost, past service costs related to plan amendments and (gain)/loss on 3 settlements and curtailments Other 8.8 9.7 0.3 Fair value of plan assets at end of year 608.5 840.6 930.0 The following table shows the breakdown of amounts recognised in the Actual return on plan assets 39.1 (17.6) 40.0 consolidated statement of comprehensive income (OCI): Notes 1 In 2019, there was an amendment to a US defined benefit plan that allowed certain participants 2019 2018 2017 to receive immediate lump sum pay-outs, which totalled £69.7 million. £m £m £m 2  In 2019 and 2018, the Group completed the transfer of the defined benefit obligations for certain UK Return on plan assets (excluding interest income) 16.7 (43.9) 13.4 plans to an insurer resulting in £47.1 million and £70.4 million, respectively, in settlement payments. Changes in demographic assumptions underlying 3  Other includes acquisitions, disposals, plan participants’ contributions and reclassifications. the present value of the plan liabilities 5.9 3.8 12.7 The reclassifications represent certain of the Group’s defined benefit plans which are included Changes in financial assumptions underlying the in this note for the first time in the periods presented. present value of the plan liabilities (64.3) 45.2 (17.0) Experience gain arising on the plan liabilities 5.1 3.8 7.9 25. EVENTS AFTER THE REPORTING PERIOD Actuarial (loss)/gain recognised in OCI (36.6) 8.9 17.0 In the period since 31 December 2019, the emergence and spread of Covid-19 has impacted the Group and its clients. The coronavirus pandemic is adversely (D) MOVEMENT IN PLAN LIABILITIES affecting and is expected to continue to adversely affect our business, The following table shows an analysis of the movement in the pension plan revenues, results of operations, financial condition and prospects. liabilities for each accounting period: The Group has approximately £2.0 billion of undrawn credit facilities at 2019 2018 2017 31 December 2019 and has supported this by further action to maintain £m £m £m liquidity, including the suspension of share buybacks and the 2019 final Plan liabilities at beginning of year 1,024.0 1,135.4 1,209.8 dividend. On working capital, we are constantly reviewing cash outflows and Service cost1 15.5 13.0 14.9 receipts to monitor our position. We are continuing to work closely with our Interest cost 26.2 30.7 32.9 clients to ensure timely payment for the services we have provided in line with Actuarial (gain)/loss: contractual commitments. Cost reduction and cash conservation measures Effect of changes in demographic assumptions (5.9) (3.8) (12.7) have also been taken, including the freezing of new hires, 20% salary and fee Effect of changes in financial assumptions 64.3 (45.2) 17.0 sacrifice for the CEO, Board members, Executive committee members and Effect of experience adjustments (5.1) (3.8) (7.9) employees earning above certain thresholds. Additionally, savings have been Benefits paid2 (140.8) (75.6) (79.7) identified on property and IT capital expenditure. (Gain)/loss due to exchange rate movements (22.7) 30.0 (36.4) Settlement payments3 (47.4) (70.4) (1.2) Close to 95% of our people are remote working and maintaining services to our Transfer to disposal group classified as held for sale (148.0) – – clients and using creativity to support clients to adjust their communications, Other 4 8.0 11.2 0.6 and support governments and NGOs in mitigating the impact of Covid-19. Plan liabilities at end of year 767.5 1,024.0 1,135.4 26. RISK MANAGEMENT POLICIES Notes FOREIGN CURRENCY RISK 1 Includes current service cost, past service costs related to plan amendments and (gain)/loss on The Group’s results in pounds sterling are subject to fluctuation as a result settlements and curtailments. 2  In 2019, there was an amendment to a US defined benefit plan that allowed certain participants to of exchange rate movements. The Group does not hedge this translation receive immediate lump sum pay-outs, which totalled £69.7 million. exposure to its earnings but does hedge the currency element of its net assets 3  In 2019 and 2018, the Group completed the transfer of the defined benefit obligations for certain UK using foreign currency borrowings, cross-currency swaps and forward foreign plans to an insurer resulting in £47.1 million and £70.4 million, respectively, in settlement payments. exchange contracts. 4  Other includes acquisitions, disposals, plan participants’ contributions and reclassifications. The reclassifications represent certain of the Group’s defined benefit plans which are included in this note for the first time in the periods presented. The Group effects these currency net asset hedges by borrowing in the same currencies as the operating (or "functional") currencies of its main operating units. The majority of the Group’s debt is therefore denominated in US dollars, pounds sterling and euros. The Group’s borrowings at 31 December 2019 were primarily made up of $1,563 million, £844 million and €2,600 million (2018: $2,784 million, £1,044 million and €3,200 million). The Group’s average gross debt during the course of 2019 was $2,509 million, £947 million and €3,128 million (2018: $3,377 million, £1,039 million and €3,202 million).

The Group’s operations conduct the majority of their activities in their own local currency and consequently the Group has no significant transactional foreign exchange exposures arising from its operations. Any significant cross-border trading exposures are hedged by the use of forward foreign- exchange contracts. No speculative foreign exchange trading is undertaken.

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26. RISK MANAGEMENT POLICIES CONTINUED GOING CONCERN AND LIQUIDITY RISK INTEREST RATE RISK In considering going concern and liquidity risk, the Directors have reviewed The Group is exposed to interest rate risk on both interest-bearing assets and the Group’s future cash requirements and earnings projections. The Directors interest-bearing liabilities. The Group has a policy of actively managing its believe these forecasts have been prepared on a prudent basis and have also interest rate risk exposure while recognising that fixing rates on all its debt considered the impact of a range of potential changes to trading performance. eliminates the possibility of benefiting from rate reductions and similarly, having The Company’s forecasts and projections, taking account of (i) reasonably all its debt at floating rates unduly exposes the Group to increases in rates. possible declines in revenue less pass-through costs; (ii) remote declines in revenue less pass‑through costs for stress‑testing purposes as a consequence Including the effect of interest rate and cross-currency swaps, 100% of the of the Covid-19 pandemic from April 2020 onwards compared to 2019; and year-end US dollar debt is at fixed rates averaging 4.06% for an average period considering the Group's bank covenant and liquidity headroom taking into of 95 months; 100% of the sterling debt is at a fixed rate of 2.73% for an average account the suspension of share buybacks and the final dividend in 2019 and period of 188 months; 80.8% of the euro debt is at fixed rates averaging 2.34% cost mitigation actions which are and which could be implemented, show that for an average period of 82 months and 19.2% of the euro debt is at floating the Company and the Group would be able to operate with appropriate rates averaging 0.06% for an average of 16 months. liquidity and within its banking covenants and be able to meet its liabilities as they fall due. The Company modelled a range of revenue less pass-through costs declines from 15% to over 35%. The Directors have concluded that the Group should be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis. The potential impact of Brexit has been considered and is not deemed to have a significant effect on this assessment.

At 31 December 2019, the Group has access to £6.3 billion of committed facilities with maturity dates spread over the years 2020 to 2046 as illustrated below:

2020 2021 2022 2023 2024+ £m £m £m £m £m £ bonds £400m (2.875% 2046) 400.0 400.0 US bond $220m (5.625% 2043) 165.8 165.8 US bond $93m (5.125% 2042) 70.0 70.0 Eurobonds €600m (1.625% 2030) 507.9 507.9 Eurobonds €750m (2.25% 2026) 634.9 634.9 Eurobonds €500m (1.375% 2025) 423.3 423.3 US bond $750m (3.75% 2024) 565.5 565.5 Bank revolver ($2,500m 2024) 1,884.9 1,884.9 Eurobonds €750m (3.0% 2023) 634.9 634.9 US bond $500m (3.625% 2022) 377.0 377.0 Eurobonds €250m (3m EURIBOR + 0.45% 2022) 211.6 211.6 Bank revolver (A$150m ’20, A$270m 2021) 222.4 79.4 143.0 Eurobonds €250m (3m EURIBOR + 0.32% 2020) 211.6 211.6 Total committed facilities available 6,309.8 291.0 143.0 588.6 634.9 4,652.3 Drawn down facilities at 31 December 2019 4,304.2 216.9 96.4 588.6 634.9 2,767.4 Undrawn committed credit facilities 2,005.6 Drawn down facilities at 31 December 2019 4,304.2 Net cash at 31 December 2019 (2,733.3) Other adjustments (31.3) Net debt at 31 December 2019 1,539.6

Given the strong cash generation of the business, its debt maturity profile and CAPITAL RISK MANAGEMENT available facilities, the Directors believe the Group has sufficient liquidity to The Group manages its capital to ensure that entities in the Group will be able match its requirements for the foreseeable future. to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure TREASURY ACTIVITIES of the Group consists of debt, which includes the borrowings disclosed in note Treasury activity is managed centrally from London, New York and Hong Kong, 10, cash and cash equivalents and equity attributable to equity holders of the and is principally concerned with the monitoring of working capital, managing parent, comprising issued capital, reserves and retained earnings as disclosed external and internal funding requirements and the monitoring and in the consolidated statement of changes in equity and in notes 28 and 29. management of financial market risks, in particular interest rate and foreign exchange exposures. Given the significant uncertainty over the coming months generated by the emergence and spread of Covid-19, the Group continues to monitor its capital The treasury operation is not a profit centre and its activities are carried out in structure. Our bond portfolio at the 31 December 2019 had an average maturity accordance with policies approved by the Board of Directors and subject to of 8.2 years, with only a May 2020 €250 million Eurobond due in the next regular review and audit. two years.

The Group manages liquidity risk by ensuring continuity and flexibility of funding even in difficult market conditions. Undrawn committed borrowing facilities are maintained in excess of peak net-borrowing levels and debt maturities are closely monitored. Targets for average net debt are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group’s major operations.

174 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

CREDIT RISK 27. FINANCIAL INSTRUMENTS The Group’s principal financial assets are cash and short-term deposits, trade CURRENCY DERIVATIVES and other receivables and investments, the carrying values of which represent The Group utilises currency derivatives to hedge significant future transactions the Group’s maximum exposure to credit risk in relation to financial assets, as and cash flows and the exchange risk arising on translation of the Group’s shown in note 27. investments in foreign operations. The Group is a party to a variety of foreign currency derivatives in the management of its exchange rate exposures. The Group’s credit risk is primarily attributable to its trade receivables. The The instruments purchased are primarily denominated in the currencies of the majority of the Group’s trade receivables are due from large national or Group’s principal markets. The Group designates its foreign currency- multinational companies where the risk of default is considered low. The denominated debt as hedging instruments against the currency risk amounts presented in the consolidated balance sheet are net of allowances associated with the translation of its foreign operations. for doubtful receivables, estimated by the Group’s management based on expected losses, prior experience and their assessment of the current The Group also designates certain cross currency swaps as hedging economic environment. A relatively small number of clients make up a instruments in cash flow hedges to manage its exposure to foreign exchange significant percentage of the Group’s debtors, but no single client represents movements on its borrowings. Contracts due in March 2025 have receipts of more than 5% of total trade receivables as at 31 December 2019. €500.0 million and payments of £444.1 million.

The credit risk on liquid funds and derivative financial instruments is limited At 31 December 2019, the fair value of the Group’s currency derivatives is because the counterparties are banks with high credit ratings assigned by estimated to be a net liability of approximately £21.2 million (2018: net asset international credit-rating agencies or banks that have been financed by of £8.4 million). These amounts are based on market values of equivalent their government. instruments at the balance sheet date, comprising £nil (2018: £8.4 million) assets included in trade and other receivables and £21.2 million (2018: £nil) A relatively small number of clients contribute a significant percentage of liabilities included in trade and other payables. The amounts taken to and the Group’s consolidated revenues. The Group’s clients generally are able to deferred in equity during the year for currency derivatives that are designated reduce advertising and marketing spending or cancel projects at any time and effective hedges was a credit of £29.2 million (2018: charge of £17.9 million) for any reason. There can be no assurance that any of the Group’s clients will for cash flow hedges. continue to utilise the Group’s services to the same extent, or at all, in the future. Clients can reduce their marketing spend, terminate contracts, or Changes in the fair value relating to the ineffective portion of the currency cancel projects on short notice. The loss of one or more of our largest clients, derivatives amounted to a loss of £nil (2018: £11.1 million) which is included if not replaced by new accounts or an increase in business from existing in the revaluation of financial instruments for the year. clients, would adversely affect our financial condition. At the balance sheet date, the total nominal amount of outstanding forward Following the emergence and spread of Covid-19 in 2020, the Group continues foreign exchange contracts not designated as hedges was £151.7 million to work closely with our clients to ensure timely payment for the services we (2018: £296.1 million). The Group estimates the fair value of these contracts have provided in line with contractual commitments. The Group constantly to be a net liability of £0.1 million (2018: £1.3 million). reviewing cash outflows and receipts to monitor our position. These arrangements are designed to address significant exchange exposure SENSITIVITY ANALYSIS and are renewed on a revolving basis as required. The following sensitivity analysis addresses the effect of currency and interest rate risks on the Group’s financial instruments. The analysis assumes that all INTEREST RATE SWAPS hedges are highly effective. The Group uses interest rate swaps as hedging instruments in fair value hedges to manage its exposure to interest rate movements on its borrowing. CURRENCY RISK During 2019 the Group terminated contracts that had a nominal value of $812 A 10% weakening of sterling against the Group’s major currencies would result million which had fixed rate receipts of 4.75% and floating interest payments in the following losses, which would be posted directly to equity. These losses averaging LIBOR plus 2.34% until November 2021. The Group also terminated would arise on the retranslation of foreign currency denominated borrowings contracts in 2019 that had a nominal value of $500 million which had fixed rate and derivatives designated as effective net investment hedges of overseas net receipts of 3.63% and floating interest payments averaging LIBOR plus 1.52% assets. These losses would be partially offset in equity by a corresponding until September 2022. gain arising on the retranslation of the related hedged foreign currency net assets. A 10% strengthening of sterling would have an equal and opposite The fair value of interest rate swaps entered into at 31 December 2019 is effect. There are no other material foreign exchange exposures which would estimated to be a net liability of £nil (2018: £14.2 million). These amounts create gains or losses to the functional reporting currencies of individual are based on market values of equivalent instruments at the balance sheet entities in the Group. date, comprising £nil (2018: £14.2 million) liabilities included in trade and other payables.

2019 2018 Changes in the fair value relating to the ineffective portion of interest rate £m £m swaps amounted to a gain of £1.0 million (2018: £0.9 million) which is included US dollar 125.2 192.2 in the revaluation of financial instruments for the year. This gain resulted from Euro 162.5 232.5 a £13.3 million loss on hedging instruments and a £14.3 million gain on INTEREST RATE RISK hedged items. A one percentage point increase in market interest rates for all currencies in which the Group had cash and borrowings at 31 December 2019 would increase profit before tax by approximately £22.6 million (2018: £7.2 million). A one percentage decrease in market interest rates would have an equal and opposite effect. This has been calculated by applying the interest rate change to the Group’s variable rate cash and borrowings.

WPP ANNUAL REPORT 2019 175 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27. FINANCIAL INSTRUMENTS CONTINUED An analysis of the Group’s financial assets and liabilities by accounting classification is set out below:

Derivatives in Held at designated Held at fair fair value hedge value through through other Amortised Carrying relationships profit or loss comprehensive cost value £m £m income £m £m 2019 Other investments – 255.7 242.6 – 498.3 Cash and short-term deposits – – – 2,969.0 2,969.0 Bank overdrafts, bonds and bank loans – – – (461.3) (461.3) Bonds and bank loans – – – (4,047.3) (4,047.3) Trade and other receivables: amounts falling due within one year – – – 7,530.8 7,530.8 Trade and other receivables: amounts falling due after more than one year – – – 59.3 59.3 Trade and other payables: amounts falling due within one year – – – (10,191.6) (10,191.6) Trade and other payables: amounts falling due after more than one year – – – (2.6) (2.6) Derivative assets – 1.4 – – 1.4 Derivative liabilities (21.2) (1.5) – – (22.7) Payments due to vendors (earnout agreements) (note 20) – (253.8) – – (253.8) Liabilities in respect of put options – (226.8) – – (226.8) (21.2) (225.0) 242.6 (4,143.7) (4,147.3)

Held at Derivatives in Held at fair value designated fair value through other hedge through profit comprehensive Amortised Carrying relationships or loss income cost value £m £m £m £m £m 2018 Other investments – 319.6 347.1 – 666.7 Cash and short-term deposits – – – 2,643.2 2,643.2 Bank overdrafts, bonds and bank loans – – – (1,025.1) (1,025.1) Bonds and bank loans – – – (5,634.8) (5,634.8) Trade and other receivables: amounts falling due within one year – – – 8,545.6 8,545.6 Trade and other receivables: amounts falling due after more than one year – – – 68.3 68.3 Trade and other payables: amounts falling due within one year – – – (10,637.3) (10,637.3) Trade and other payables: amounts falling due after more than one year – – – (8.4) (8.4) Derivative assets 8.4 1.3 – – 9.7 Derivative liabilities (14.2) (2.6) – – (16.8) Payments due to vendors (earnout agreements) (note 20) – (414.7) – – (414.7) Liabilities in respect of put options – (242.0) – – (242.0) (5.8) (338.4) 347.1 (6,048.5) (6,045.6)

The Group is party to certain cash pooling arrangements with its banks and Level 1 fair value measurements are those derived from quoted prices has offset cash and short-term deposits and bank overdrafts where a legally (unadjusted) in active markets for identical assets or liabilities; enforceable right to set off exists. At 31 December 2019, £6,832.8 million (2018: £6,214.2 million) had been offset. Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or The following table provides an analysis of financial instruments that are liability, either directly (ie as prices) or indirectly (ie derived from prices); measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable: Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

176 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Level 1 Level 2 Level 3 PAYMENTS DUE TO VENDORS AND LIABILITIES IN RESPECT 2019 £m £m £m OF PUT OPTIONS Derivatives in designated hedge relationships Future anticipated payments due to vendors in respect of contingent Derivative assets – – – consideration (earnout agreements) are recorded at fair value, which is the Derivative liabilities – (21.2) – present value of the expected cash outflows of the obligations. Liabilities in Held at fair value through profit or loss respect of put option agreements are initially recorded at the present value Other investments – – 255.7 of the redemption amount in accordance with IAS 32. After recognition, Derivative assets – 1.4 – the liability is remeasured in accordance with IFRS 9 and is subject to the Derivative liabilities – (1.5) – estimation of future performance of the business acquired. Changes in the Payments due to vendors (earnout agreements) estimation result in re-measurement of the liability through the income (note 20) – – (253.8) statement. Both types of obligations are dependent on the future financial Liabilities in respect of put options – – (226.8) performance of the entity and it is assumed that future profits are in line Held at fair value through other with Directors’ estimates. The Directors derive their estimates from internal comprehensive income business plans together with financial due diligence performed in connection Other investments 42.2 – 200.4 with the acquisition. At 31 December 2019, the weighted average growth rate in estimating future financial performance was 19.5% (2018: 22.7%), which Level 1 Level 2 Level 3 reflects the prevalence of recent acquisitions in the faster-growing markets 2018 £m £m £m and new media sectors. The risk adjusted discount rate applied to these Derivatives in designated hedge relationships obligations at 31 December 2019 was 1.4% (2018: 2.9%). Derivative assets – 8.4 – Derivative liabilities – (14.2) – A one percentage point increase or decrease in the growth rate in estimated Held at fair value through profit or loss future financial performance would increase or decrease the combined Other investments 0.4 – 319.2 liabilities due to earnout agreements and put options by approximately Derivative assets – 1.3 – £4.6 million (2018: £6.8 million) and £7.7 million (2018: £10.4 million), respectively. A 0.5 percentage point increase or decrease in the risk Derivative liabilities – (2.6) – adjusted discount rate would decrease or increase the combined liabilities Payments due to vendors (earnout agreements) (note 20) – – (414.7) by approximately £5.6 million (2018: £7.1 million) and £5.7 million (2018: Liabilities in respect of put options – – (242.0) £7.2 million), respectively. An increase in the liability would result in a loss in the revaluation of financial instruments, while a decrease would result Held at fair value through other comprehensive income in a gain. Other investments 128.1 – 219.0 OTHER INVESTMENTS There have been no transfers between these levels in the years presented. The fair value of other investments included in level 1 are based on quoted market prices. Other investments included in level 3 are unlisted securities, Reconciliation of level 3 fair value measurements1: where market value is not readily available. The Group has estimated relevant fair values on the basis of publicly available information from outside sources Liabilities in using the most appropriate valuation technique, including all external funding respect of Other rounds, revenue and EBITDA multiples, the share of fund net asset value and put options investments £m £m discounted cash flows. Certain investments are valued using revenue 1 January 2018 (258.1) 820.3 multiples. An increase or decrease in this multiple of one times revenue would result in an increase or decrease in the value of investments of £53.6 million, Gains recognised in the income statement 34.5 61.1 which would result in a credit or charge to the income statement of Losses recognised in other comprehensive income – (140.6) £3.3 million and equity of £50.3 million. The sensitivity to changes in Exchange adjustments 1.1 – unobservable inputs is specific to each individual investment. Additions (43.5) 35.0 Disposals – (237.3) 28. AUTHORISED AND ISSUED SHARE CAPITAL Cancellations 2.2 – Reclassifications from other investments to interests in Equity Nominal associates – (0.3) ordinary value Settlements 21.8 – shares £m 31 December 2018 (242.0) 538.2 Authorised (Losses)/gains recognised in the income statement (19.4) 9.1 1 January 2018 1,750,000,000 175.0 Losses recognised in other comprehensive income – (55.4) 31 December 2018 1,750,000,000 175.0 Exchange adjustments 11.7 – 31 December 2019 1,750,000,000 175.0 Additions (38.6) 18.2 Disposals – (53.4) Issued and fully paid Cancellations 9.7 – At 1 January 2018 1,332,511,552 133.3 Transfer to disposal group classified as held for sale 31.0 (0.6) Exercise of share options 166,675 – Settlements 20.8 – At 31 December 2018 1,332,678,227 133.3 31 December 2019 (226.8) 456.1 Exercise of share options 75,625 – Share cancellations (4,586,039) (0.5) Note At 31 December 2019 1,328,167,813 132.8 1 The reconciliation of payments due to vendors (earnout agreements) is presented in note 20.

The fair values of financial assets and liabilities are based on quoted market COMPANY’S OWN SHARES prices where available. Where the market value is not available, the Group has The Company’s holdings of own shares are stated at cost and represent shares estimated relevant fair values on the basis of publicly available information held in treasury and purchases by the Employee Share Ownership Plan (ESOP) from outside sources. There have been no movements between level 3 and trusts of shares in WPP plc for the purpose of funding certain of the Group’s other levels. share-based incentive plans, details of which are disclosed in the Compensation Committee report on pages 114-137.

WPP ANNUAL REPORT 2019 177 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28. AUTHORISED AND ISSUED SHARE CAPITAL CONTINUED WPP SHARE OPTION PLAN 2015 (WSOP) The trustees of the ESOP purchase the Company’s ordinary shares in the As at 31 December 2019, unexercised options over ordinary shares of 13,413,425 open market using funds provided by the Company. The Company also has and unexercised options over ADRs of 1,396,745 have been granted under the an obligation to make regular contributions to the ESOP to enable it to meet WPP Worldwide Share Ownership Programme as follows: its administrative costs. The number and market value of the ordinary shares of the Company held by the ESOP at 31 December 2019 was 9,219,837 Number of ordinary Exercise price Exercise (2018: 14,820,994), and £98.3 million (2018: £125.5 million) respectively. shares under option per share (£) dates The number and market value of ordinary shares held in treasury at 18,250 8.372 2021-2025 31 December 2019 was 70,787,730 (2018: 70,854,553) and £755.0 million 3,406,900 8.372 2021-2028 (2018: £599.9 million) respectively. 15,500 9.600 2022-2026 2,863,975 9.600 2022-2029 SHARE OPTIONS 19,250 13.085 2020-2024 2,785,100 13.085 2020-2027 WPP EXECUTIVE SHARE OPTION SCHEME (WPP) 55,500 15.150 2018-2022 As at 31 December 2019, unexercised options over ordinary shares of 6,741 have 1,952,200 15.150 2018-2025 been granted under the WPP Executive Share Option Scheme as follows: 5,375 15.150 2019-2025 Number of ordinary Exercise price Exercise 12,375 17.055 2019-2023 shares under option per share (£) dates 2,279,000 17.055 2019-2026 3,696 8.333 2015-2022 3,045 10.595 2016-2023 Number of ADRs Exercise price Exercise under option per ADR ($) dates WPP WORLDWIDE SHARE OWNERSHIP PROGRAMME (WWOP) 347,660 53.140 2021-2028 As at 31 December 2019, unexercised options over ordinary shares of 2,757,654 347,105 62.590 2022-2029 and unexercised options over ADRs of 388,854 have been granted under the 276,790 88.260 2020-2027 WPP Worldwide Share Ownership Programme as follows: 236,265 105.490 2020-2026 Number of ordinary Exercise price Exercise 188,925 115.940 2018-2025 shares under option per share (£) dates 82,650 6.268 2014-2021 36,500 6.268 2015-2021 53,150 7.113 2013-2020 25,750 7.113 2014-2020 194,079 8.458 2015-2022 43,000 13.145 2017-2021 1,739,050 13.145 2017-2024 4,375 13.145 2018-2024 564,975 13.505 2016-2023 14,125 13.505 2017-2023

Number of ADRs Exercise price Exercise under option per ADR ($) dates 24,550 49.230 2014-2021 16,530 56.560 2013-2020 39,184 67.490 2015-2022 166,655 102.670 2017-2024 141,935 110.760 2016-2023

The aggregate status of the WPP Share Option Plans during 2019 was as follows:

Outstanding Exercisable 1 January 31 December 31 December 2019 Granted Exercised Lapsed 2019 2019 Movements on options granted (represented in ordinary shares) WPP 6,741 – – – 6,741 6,741 WWOP 5,520,774 – (71,475) (747,375) 4,701,924 4,701,924 WSOP 18,691,100 4,615,000 (4,150) (2,904,800) 20,397,150 5,249,075 24,218,615 4,615,000 (75,625) (3,652,175) 25,105,815 9,957,740

Outstanding Exercisable 1 January 31 December 31 December 2019 Granted Exercised Lapsed 2019 2019 Weighted-average exercise price for options over Ordinary shares (£) WPP 9.355 – – – 9.355 9.355 WWOP 12.290 – 6.888 12.027 12.421 12.421 WSOP 12.753 9.600 8.372 12.405 12.121 16.164 ADRs ($) WWOP 95.453 – 47.388 91.622 96.744 96.744 WSOP 84.893 62.590 53.140 82.290 79.798 115.940

178 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

OPTIONS OVER ORDINARY SHARES The Worldwide Share Ownership Programme was open for participation to employees with at least two years’ employment in the Group. It was not Range of Weighted average Weighted average available to those participating in other share-based incentive programmes exercise prices exercise price contractual life or to Executive Directors. The vesting period for each grant is three years Outstanding £ £ Months and there are no performance conditions other than continued employment 6.268-17.055 12.171 90 with the Group. OPTIONS OVER ADRs The Executive Stock Option Plan has historically been open for participation Range of Weighted average Weighted average to WPP Group Leaders, Partners and High Potential Group. It is not currently exercise prices exercise price contractual life offered to Parent Company Executive Directors. The vesting period is three Outstanding $ $ Months years and performance conditions include achievement of various TSR (Total 49.230-115.940 83.488 89 Shareholder Return) and EPS (Earnings Per Share) objectives, as well as continued employment. The terms of these stock options are such that if, after As at 31 December 2019 there was £7.3 million (2018: £8.5 million) of total nine years and eight months, the performance conditions have not been met, unrecognised compensation costs related to share options. That cost is then the stock option will vest automatically. expected to be recognised over a weighted average period of 19 months (2018: 20 months). The Group grants stock options with a life of 10 years, including the vesting period. Share options are satisfied out of newly issued shares. 29. OTHER RESERVES The weighted average fair value of options granted in the year calculated Other reserves comprise the following: using the Black-Scholes model was as follows: Capital Total 2019 2018 2017 redemption Equity Revaluation Translation other Fair value of UK options (shares) 117.0p 107.0p 112.0p reserve reserve reserve reserve reserves Fair value of US options (ADRs) $8.49 $8.09 $9.40 £m £m £m £m £m Weighted average assumptions 1 January 2018 2.7 (257.2) 303.4 712.8 761.7 UK Risk-free interest rate 0.57% 0.78% 0.57% Exchange adjustments on foreign currency US Risk-free interest rate 1.61% 2.74% 2.05% net investments – – – 69.9 69.9 Expected life (months) 48 48 48 Accounting policy Expected volatility 24% 24% 17% change (IFRS 9)1 – – (303.4) (104.0) (407.4) Dividend yield 3.8% 3.5% 2.9% Recognition and remeasurement of financial instruments – (30.7) – – (30.7) Options are issued at an exercise price equal to market value on the date of grant. 31 December 2018 2.7 (287.9) – 678.7 393.5 Exchange adjustments on foreign currency The average share price of the Group for the year ended 31 December 2019 net investments – – – (361.4) (361.4) was £9.39 (2018: £11.56, 2017: £15.86) and the average ADR price for the same Exchange adjustments period was $59.93 (2018: $77.31, 2017: $101.86). recycled to the income statement on disposal of Expected volatility is sourced from external market data and represents the discontinued operations – – – (284.0) (284.0) historic volatility in the Group’s share price over a period equivalent to the Share cancellations 0.5 – – – 0.5 expected option life. Recognition and remeasurement of financial instruments – 2.5 – – 2.5 Expected life is based on a review of historic exercise behaviour in the context Share purchases – close of the contractual terms of the options, as described in more detail below. period commitments – (252.3) – – (252.3) 31 December 2019 3.2 (537.7) – 33.3 (501.2) TERMS OF SHARE OPTION PLANS In 2015, the Group introduced the Share Option Plan 2015 to replace both the Note 1 Due to the adoption of IFRS 9, cumulative gains and losses on revaluation of available for sale "all-employee" Worldwide Share Ownership Plan and the discretionary investments have been transferred to retained earnings. Executive Stock Option Plan. Two kinds of options over ordinary shares can be granted, both with a market value exercise price. Firstly, options can be granted to employees who have worked at a company owned by WPP plc for at least two years which are not subject to performance conditions. Secondly, options may be granted on a discretionary basis subject to the satisfaction of performance conditions.

WPP ANNUAL REPORT 2019 179 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30. ACQUISITIONS 32. RECONCILIATION TO NON-GAAP MEASURES OF PERFORMANCE The Group accounts for acquisitions in accordance with IFRS 3 Business Management includes non-GAAP measures as they consider these measures Combinations. IFRS 3 requires the acquiree’s identifiable assets, liabilities and to be both useful and necessary. They are used by management for internal contingent liabilities (other than non-current assets or disposal groups held for performance analyses; the presentation of these measures facilitates sale) to be recognised at fair value at acquisition date. In assessing fair value at comparability with other companies, although management’s measures may acquisition date, management make their best estimate of the likely outcome not be calculated in the same way as similarly titled measures reported by where the fair value of an asset or liability may be contingent on a future event. other companies; and these measures are useful in connection with In certain instances, the underlying transaction giving rise to an estimate may discussions with the investment community. not be resolved until some years after the acquisition date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become Reconciliation of revenue to revenue less pass-through costs: excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions 2019 20181 20171 and other balances established in respect of acquisitions for their continued Continuing operations £m £m £m probability of occurrence and amend the relevant value accordingly through Revenue 13,234.1 13,046.7 13,146.4 the consolidated income statement or as an adjustment to goodwill as Media pass-through costs (1,656.2) (1,458.0) (1,429.4) appropriate under IFRS 3. Other pass-through costs (731.4) (713.0) (573.1) Revenue less pass-through costs 10,846.5 10,875.7 11,143.9

Goodwill arising from acquisitions represents the value of synergies with Note our existing portfolio of businesses and skilled staff to deliver services to 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held our clients. for Sale and Discontinued Operations, as described in the accounting policies.

Non-controlling interests in acquired companies are measured at the Pass-through costs comprise fees paid to external suppliers when they are non-controlling interests’ proportionate share of the acquiree’s identifiable engaged to perform part or all of a specific project and are charged directly net assets. to clients. This includes the cost of media where the Group is buying digital media for its own account on a transparent opt-in basis and, as a result, the The contribution to revenue and operating profit of acquisitions completed subsequent media pass-through costs have to be accounted for as revenue, in the year was not material. There were no material acquisitions completed as well as billings. Therefore, management considers that revenue less in the year ended 31 December 2019 or between 31 December 2019 and the pass-through costs gives a helpful reflection of top-line growth. date the financial statements have been authorised for issue. Reconciliation of operating profit to headline operating profit: 31. RELATED PARTY TRANSACTIONS From time to time the Group enters into transactions with its associate 2019 20181 20171 Continuing operations £m £m £m undertakings. These transactions were not material for either year presented. Operating profit 1,295.9 1,237.9 1,577.9 The Group has continuing transactions with Kantar, including sales, purchases, Amortisation and impairment of acquired intangible assets 121.5 201.8 138.0 the provision of IT services, subleases and property related items. None of Goodwill impairment 47.7 183.9 27.1 these were material in the period since 5 December 2019 when Kantar became Gains on disposal of investments and subsidiaries (40.4) (237.9) (98.7) a related party as an associate. (Gains)/losses on remeasurement of equity interests arising from a change in scope of ownership (0.4) (2.0) 0.3 The following amounts were outstanding at 31 December 2019: Investment write-downs 7.5 2.0 91.7 2019 Litigation settlement (16.8) – – £m Gain on sale of freehold property in New York (7.9) – – Amounts owed by related parties Restructuring and transformation costs 153.5 265.5 56.8 Kantar 87.5 Headline operating profit 1,560.6 1,651.2 1,793.1 Other 87.5 Finance and investment income 99.0 98.9 89.0 175.0 Finance costs (excluding interest expense related to lease liabilities) (259.4) (279.1) (261.9) Amounts owed to related parties (160.4) (180.2) (172.9) Kantar (36.5) 9.7 9.2 10.4 Interest cover2 on headline operating profit times times times Other (49.6) (86.1) Notes 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. 2  Interest expense related to lease liabilities is excluded from interest cover as lease liabilities are excluded from the Group’s key leverage metrics.

Headline operating profit is one of the metrics that management uses to assess the performance of the business.

180 WPP ANNUAL REPORT 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Headline operating profit margin before and after share of Reconciliation of free cash flow: results of associates: 2019 20181 20171 Margin 2019 Margin1 20181 Margin1 20171 £m £m £m Continuing operations % £m % £m % £m Cash generated by continuing and discontinued Revenue less pass- operations (note 11) 2,693.2 2,174.7 1,938.9 through costs 10,846.5 10,875.7 11,143.9 Plus Headline operating profit 14.4 1,560.6 15.2 1,651.2 16.1 1,793.1 Interest received 80.8 90.4 76.9 Share of results of Investment income 18.3 15.4 16.8 associates (excluding Dividends from associates 33.3 49.7 46.8 exceptional gains/losses) 62.5 72.0 97.4 Share option proceeds 0.6 1.2 6.4 Headline PBIT 15.0 1,623.1 15.8 1,723.2 17.0 1,890.5 Less Note Earnout payments (130.2) (120.2) (199.1) 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies. Interest and similar charges paid (270.6) (252.8) (246.6) Purchases of property, plant and equipment (339.3) (314.8) (288.9) Calculation of headline EBITDA: Purchase of other intangible assets (including capitalised computer software) (54.8) (60.4) (37.3) 2019 20181 20171 Repayment of lease liabilities (249.8) – – Continuing operations £m £m £m Interest paid on lease liabilities (105.1) – – Headline PBIT (as above) 1,623.1 1,723.2 1,890.5 Corporation and overseas tax paid (536.0) (383.6) (424.7) Depreciation of property, plant and equipment 185.5 188.6 189.0 Dividends paid to non-controlling interests in Amortisation of other intangible assets 21.2 20.7 20.1 subsidiary undertakings (96.2) (106.2) (87.8) Headline EBITDA (including depreciation Free cash flow 1,044.2 1,093.4 801.4 off right-o -use assets) 1,829.8 1,932.5 2,099.6 Note Depreciation of right-of-use assets 301.6 – – 1 Prior year free cash flow has been re-presented to exclude proceeds on disposal of property, Headline EBITDA 2,131.4 1,932.5 2,099.6 plant and equipment.

Note 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for The Group bases its internal cash flow objectives on free cash flow. Sale and Discontinued Operations, as described in the accounting policies. Management believes free cash flow is meaningful to investors because it is the measure of the Group’s funds available for acquisition-related payments, Headline EBITDA is a key metric that private equity firms, for example, use for dividends to shareholders, share repurchases and debt repayment. The valuing companies, and is one of the metrics that management uses to assess purpose of presenting free cash flow is to indicate the ongoing cash the performance of the business. Headline EBITDA (including depreciation of generation within the control of the Group after taking account of the right-of-use assets) is used in the Group’s key leverage metric. necessary cash expenditures of maintaining the capital and operating structure of the Group (in the form of payments of interest, corporate taxation Calculation of headline non-controlling interests: and capital expenditure).

2019 20181 20171 PERFORMANCE MEASURES INCLUDING KANTAR Continuing operations £m £m £m Like-for-like revenue less pass-through costs and headline operating margin Non -controlling interests 79.2 65.1 84.4 including Kantar reflect the full year performance as if Kantar was owned by Non-controlling interests relating to restructuring the Group throughout the entirety of 2019 adjusted to remove the effects of and transformation costs – 4.7 – held for sale accounting. Headline non-controlling interests 79.2 69.8 84.4

Note CONSTANT CURRENCY AND PRO FORMA (‘LIKE-FOR-LIKE’) 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for These consolidated financial statements are presented in pounds sterling. Sale and Discontinued Operations, as described in the accounting policies. However, the Group’s significant international operations give rise to fluctuations in foreign exchange rates. To neutralise foreign exchange impact Reconciliation of profit before taxation to headline PBT and and illustrate the underlying change in revenue and profit from one year to the headline earnings: next, the Group has adopted the practice of discussing results in both reportable currency (local currency results translated into pounds sterling at 2019 20181 20171 Continuing operations £m £m £m the prevailing foreign exchange rate) and constant currency. Profit before taxation 982.1 1,257.6 1,746.9 Management also believes that discussing pro forma or like-for-like contributes Amortisation and impairment of acquired intangible assets 121.5 201.8 138.0 to the understanding of the Group’s performance and trends because it allows Goodwill impairment 47.7 183.9 27.1 for meaningful comparisons of the current year to that of prior years. Gains on disposal of investments and subsidiaries (40.4) (237.9) (98.7) Further details of the constant currency and pro forma methods are given in (Gains)/losses on remeasurement of equity interests arising from a change in scope of ownership (0.4) (2.0) 0.3 the glossary on pages 204 and 205. Investment write-downs 7.5 2.0 91.7 Restructuring and transformation costs 153.5 265.5 56.8 Share of exceptional losses/(gains) of associates 47.8 41.5 (0.6) Litigation settlement (16.8) – – Gain on sale of freehold property in New York (7.9) – – Revaluation of financial instruments 68.4 (169.4) (243.9) Headline PBT 1,363.0 1,543.0 1,717.6 Headline tax charge (note 7) (299.6) (320.1) (318.6) Headline non-controlling interests (79.2) (69.8) (84.4) Headline earnings 984.2 1,153.1 1,314.6

Note 1 Prior year figures have been re-presented in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as described in the accounting policies.

Headline PBT and headline earnings are metrics that management use to assess the performance of the business.

WPP ANNUAL REPORT 2019 181 FINANCIAL STATEMENTS

COMPANY PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2019

2019 2018 Notes £m £m Turnover – – Operating income 0.5 10.8 Operating profit 0.5 10.8 Income from shares in Group undertakings – 35.9 Interest receivable and similar income 0.1 – Interest payable and similar charges 34 (138.9) (127.1) Loss on ordinary activities before taxation (138.3) (80.4) Taxation on loss on ordinary activities 35 – – Loss for the year (138.3) (80.4)

Note The accompanying notes form an integral part of this profit and loss account.

All results are derived from continuing activities.

There are no recognised gains or losses in either year, other than those shown above, and accordingly no statement of comprehensive income has been prepared.

182 WPP ANNUAL REPORT 2019 FINANCIAL STATEMENTS

COMPANY BALANCE SHEET

AS AT 31 DECEMBER 2019

2019 2018 Notes £m £m Fixed assets Investments 36 13,231.5 13,160.1 13,231.5 13,160.1 Current assets Debtors due within one year 37 1,647.9 1,676.2 Cash at bank and in hand 216.8 – 1,864.7 1,676.2 Current liabilities Creditors: amounts falling due within one year 38 (8,446.3) (6,368.1) Net current liabilities (6,581.6) (4,691.9) Total assets less current liabilities 6,649.9 8,468.2 Creditors: amounts falling due after more than one year 39 (688.3) (1,389.8) Net assets 5,961.6 7,078.4

Capital and reserves Called-up share capital 132.8 133.3 Share premium account 570.3 569.7 Other reserves 40 (262.3) (10.0) Capital redemption reserve 3.2 2.7 Own shares (1,045.9) (1,046.9) Profit and loss account 6,563.5 7,429.6 Equity shareholders’ funds 5,961.6 7,078.4

Note The accompanying notes form an integral part of this balance sheet.

The financial statements were approved by the Board of Directors and authorised for issue on 29 April 2020.

Mark Read Paul Richardson Chief Executive Officer Group Finance Director

Registered Company Number: 111714

WPP ANNUAL REPORT 2019 183 FINANCIAL STATEMENTS

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

Total Capital equity Ordinary Share Other redemption Own Profit and shareholders’ share capital premium reserves1 reserve shares loss account funds £m £m £m £m £m £m £m Balance at 1 January 2018 133.3 568.5 (10.0) 2.7 (944.1) 8,174.1 7,924.5 Ordinary shares issued – 1.2 – – – – 1.2 Treasury share additions – – – – (104.3) – (104.3) Treasury share allocations – – – – 1.5 (1.5) – Loss for the year – – – – – (80.4) (80.4) Dividends paid – – – – – (747.4) (747.4) Non-cash share-based incentive plans (including share options) – – – – – 84.8 84.8 Balance at 31 December 2018 133.3 569.7 (10.0) 2.7 (1,046.9) 7,429.6 7,078.4 Ordinary shares issued – 0.6 – – – – 0.6 Share cancellations (0.5) – – 0.5 – (47.7) (47.7) Treasury share allocations – – – – 1.0 (1.0) – Loss for the year – – – – – (138.3) (138.3) Dividends paid – – – – – (750.5) (750.5) Non-cash share-based incentive plans (including share options) – – – – – 71.4 71.4 Share purchases – close period commitments – – (252.3) – – – (252.3) Balance at 31 December 2019 132.8 570.3 (262.3) 3.2 (1,045.9) 6,563.5 5,961.6

Notes The accompanying notes form an integral part of this statement of changes in equity. 1 Other reserves are analysed in note 40.

184 WPP ANNUAL REPORT 2019 FINANCIAL STATEMENTS

NOTES TO THE COMPANY FINANCIAL STATEMENTS

33. ACCOUNTING POLICIES (D) TAXATION The principal accounting policies of WPP plc (the Company) are summarised Current tax is provided at amounts expected to be paid (or recovered) using below. These accounting policies have all been applied consistently the tax rates and laws that have been enacted or substantively enacted by the throughout the year and preceding year. balance sheet date.

(A) BASIS OF ACCOUNTING Deferred tax is the tax expected to be payable or recoverable on differences The separate financial statements of the Company are prepared under the between the carrying amounts of assets and liabilities in the financial historical cost convention in accordance with the Companies (Jersey) Law statements and the corresponding tax bases used in the computation of 1991. The company meets the definition of a qualifying entity under FRS 100 taxable profit, and is accounted for using the balance sheet liability method. (Financial Reporting Standard 100) issued by the Financial Reporting Council. Deferred tax liabilities are recognised for all taxable temporary differences unless specifically excepted by IAS 12 Income Taxes. Deferred tax is charged These financial statements were prepared in accordance with Financial or credited in the consolidated income statement, except when it relates to Reporting Standard 101 Reduced Disclosure Framework. As permitted by FRS items charged or credited to other comprehensive income or directly to 101, the Company has taken advantage of the disclosure exemptions available equity, in which case the deferred tax is also dealt with in other under that standard in relation to share-based payment, financial instruments, comprehensive income or equity. Deferred tax assets are recognised to the capital management, presentation of a cash-flow statement and certain extent that it is probable that taxable profits will be available against which related-party transactions. deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial Where required, equivalent disclosures are given in the consolidated financial recognition of goodwill or other assets and liabilities (other than in a business statements. The financial statements are prepared on a going concern basis, combination) in a transaction that affects neither the tax profit nor the further details of which are in the Directors’ report on page 84. accounting profit.

(B) TRANSLATION OF FOREIGN CURRENCY (E) GROUP AND TREASURY SHARE TRANSACTIONS Foreign currency transactions arising from operating activities are translated Where a parent entity grants rights to its equity instruments to employees from local currency into pounds sterling at the exchange rates prevailing at the of a subsidiary, and such share-based compensation is accounted for as date of the transaction. Monetary assets and liabilities denominated in foreign equity-settled in the consolidated financial statements of the parent, IFRS 2 currencies at the period end are translated at the period-end exchange rate. (share-based payment) requires the subsidiary to record an expense for such Foreign currency gains or losses are credited or charged to the profit and loss compensation with a corresponding increase recognised in equity as a account as they arise. contribution from the parent. Consequently, in the financial statements of the parent (WPP plc), the Company has recognised an addition to fixed asset (C) INVESTMENTS investments of the aggregate amount of these contributions of £71.4 million Fixed asset investments are stated at cost less provision for impairment. in 2019 (2018: £84.8 million), with a credit to equity for the same amount. Investments are tested for impairment annually. At 31 December 2019, the recoverable amount was assessed based on the Group's market value and (F) EXPECTED CREDIT LOSSES exceeded the carrying value at that date. Amounts owed by subsidiaries are recorded at amortised cost and are reduced by expected credit losses. Under IFRS 9 Financial Instruments, the expected credit losses are measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

WPP ANNUAL REPORT 2019 185 FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS

34. INTEREST PAYABLE AND SIMILAR CHARGES 38. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in creditors falling due within one year: 2019 2018 £m £m 2019 2018 Bank and other interest payable 26.9 37.8 £m £m Interest payable to subsidiary undertakings 112.0 89.3 Bank overdrafts 1,222.5 1,174.1 138.9 127.1 Amounts due to subsidiary undertakings 6,964.3 5,190.3 Share purchases – close period commitments 252.3 – Other creditors and accruals 7.2 3.7 35. TAXATION ON LOSS ON ORDINARY ACTIVITIES 8,446.3 6,368.1 The tax assessed for the year differs from that resulting from applying the rate of corporation tax in the UK of 19% (2018: 19%). The differences are explained below: 39. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 2019 2018 The following are included in creditors falling due after more than one year: £m £m

Loss on ordinary activities before tax (138.3) (80.4) 2019 2018 Tax at the rate of 19% (2018: 19%) thereon 26.3 15.3 £m £m Factors affecting tax charge for the year Amounts due to subsidiary undertakings 688.3 1,389.8 Group relief not paid for (26.3) (22.1) Items that are not deductible/(taxable) – 6.8 Total borrowings are repayable as follows: Tax charge for the year – – 2019 2018 £m £m Within one year 8,446.3 6,368.1 36. FIXED ASSET INVESTMENTS Between one and five years 535.4 1,010.9 The following are included in the net book value of fixed asset investments: Over five years 152.9 378.9 Subsidiary 9,134.6 7,757.9 undertakings £m 1 January 2019 13,160.1 40. EQUITY SHAREHOLDERS’ FUNDS Additions 71.4 Other reserves at 31 December 2019 comprise a translation reserve of 31 December 2019 13,231.5 £10.0 million (2018: £10.0 million) and an equity reserve of £252.3 million (2018: £nil). Fixed asset investments primarily represent 100% of the issued share capital of WPP Jubilee Limited, a company incorporated in Great Britain. At 31 December 2019 the Company’s distributable reserves amounted to Fixed asset investments were purchased in a share-for-share exchange. £5,825.6 million (2018: £6,942.4 million). Further details of the Company’s share At 31 December 2019 cost and net book value were the same. capital are shown in note 28.

37. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The following are included in debtors falling due within one year:

2019 2018 £m £m Amounts owed by subsidiary undertakings 1,646.8 1,675.6 Other debtors 1.1 0.6 1,647.9 1,676.2

There were no expected credit losses on debtors in the year ended 31 December 2019 (2018: nil).

186 WPP ANNUAL REPORT 2019 FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WPP PLC

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINION In our opinion: –– the financial statements of WPP plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s profit and the Parent Company’s loss for the year then ended; –– the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board (IASB); –– the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and –– the financial statements have been properly prepared in accordance with the requirements of the Companies Jersey Law 1991.

We have audited the financial statements which comprise: –– the accounting policies; –– the consolidated income statement, excluding the US dollar information; –– the consolidated statement of comprehensive income; –– the consolidated cash flow statement; –– the consolidated balance sheet; –– the consolidated statement of changes in equity; –– the Parent Company profit and loss account, balance sheet and statement of changes in equity; and –– the related notes 1 to 40.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the group and parent company for the year are disclosed in note 3 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

SUMMARY OF OUR AUDIT APPROACH

Key audit matters The key audit matters that we identified in the current year were: –– Goodwill –– Taxation –– Assets held for sale and discontinued operations –– Going concern .

Within this report, any new key audit matters are identified with and any key audit matters which are the same as the prior year identified with . Materiality The materiality that we used for the Group financial statements was £55 million (2018: £80 million) which was determined on the basis of pre-tax profit from continuing operations (2018: pre-tax profit). The reduction in materiality compared to the prior year reflects the presentation of the Kantar businesses in discontinued operations. Scoping Those entities subject to audit represented 75% of the Group’s consolidated revenue from continuing operations (2018: 76% of the Group’s consolidated revenue) and 92% of the Group’s consolidated operating profit from continuing operations (2018: 81% of the Group’s consolidated operating profit); achieved through a combination of direct testing and specified audit procedures, including substantive analytical review procedures, performed by the Group auditor and/or component auditors across the world. Significant changes We have revised our assessment of key audit matters as compared to the prior year as discussed below. in our approach

WPP ANNUAL REPORT 2019 187 FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC

CONCLUSIONS RELATING TO GOING CONCERN, PRINCIPAL RISKS AND VIABILITY STATEMENT GOING CONCERN We have reviewed the directors’ statement in the Strategic Report and note 26 to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and their identification of any material uncertainties to the Group’s and Parent Company’s ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements.

We considered as part of our risk assessment the nature of the Group, its business model and related risks including where relevant the impact of external economic factors including the potential impact of the COVID-19 pandemic and Brexit, the requirements of the applicable financial reporting framework and the Group’s system of internal control. We evaluated the directors’ assessment of the Group’s ability to continue as a going concern, including challenging the underlying data and key assumptions used to make the assessment, and evaluated the directors’ plans for future actions in relation to their going concern assessment.

We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit.

Going concern is the basis of preparation of the financial statements that assumes an entity will remain in operation for a period of at least 12 months from the date of approval of the financial statements. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.

PRINCIPAL RISKS AND VIABILITY STATEMENT Based solely on reading the Strategic Report and considering whether the principal risks and viability statement were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the directors’ assessment of the Group’s and the Parent Company’s ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to:

–– the disclosures on pages 84-91 that describe the principal risks and explain how they are being managed or mitigated; –– the directors' confirmation on page 84 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or –– the directors’ explanation on page 84 as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We are also required to report whether the directors’ statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.

Viability means the ability of the group to continue over the time horizon considered appropriate by the directors. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.

KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the audit team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

For the prior year audit we identified the recognition of revenue related to the Kantar network as a key audit matter due to the impact of Kantar’s revenues in the prior year on the pricing of the Kantar disposal transaction. As the sale was agreed in the first half of the current year, we determined that Kantar revenue recognition is no longer a key audit matter. Furthermore, we determined that there is no longer a key audit matter related to the cut-off of restructuring and transformation costs due to the amount of restructuring costs expected to be incurred in the current year being significantly reduced compared to the prior year.

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Key audit matter How the scope of our audit responded to the key audit matter Key observations

GOODWILL (Refer to the Accounting Policies and Notes 3 and 14 to the financial statements, and the Audit Committee Report)

The net book value of goodwill was £10,171 million as at Our audit procedures focused on challenging the inputs to the Based on our 31 December 2019 (2018: £13,203 million). The Group’s discounted cash flow model used to determine the recoverable procedures, we assessment of goodwill for impairment involves the comparison amount of each group of cash generating units and included the determined of the recoverable amount of goodwill to its carrying value as at following audit procedures, among others: management’s the 30 September measurement date. An impairment charge of –– We tested the effectiveness of controls over management’s assumptions used in £48 million was recorded in the current year (2018: £184 million) selection of the discount rate, short-term forecasts and the valuation of related to a number of under-performing businesses. The Group long-term growth rates used to determine the recoverable goodwill to be used the value in use approach which uses a discounted cash amount for each group of cash generating units. reasonable. flow to estimate the recoverable amount of each group of cash –– We agreed the underlying cash flow projections to generating units, using assumptions related to discount rates, Board ‑approved forecasts and we tested management’s As set out in the Audit short-term forecasts and long-term growth rates. The impact of ability to accurately forecast future revenues and growth Committee Report on COVID-19 was treated as a non-adjusting subsequent event and rates by comparing actual results to management’s page 110, a control was not reflected within the goodwill impairment testing. historical forecasts. weakness was –– With the assistance of our valuation specialists we tested the identified with respect We identified goodwill valuation and allocation as a key appropriateness of the discount rates used for each group of to management’s audit matter because of the significant judgements made by cash generating units by: review and selection management to estimate the recoverable amount of goodwill. –– Testing the source information underlying the of the appropriate Estimates of future performance and market conditions used determination of the discount rate and the mathematical discount rates for use to arrive at the net present value of future cash flows at accuracy of the calculation. in the impairment 30 September, which is used within the goodwill impairment –– Developing a range of independent estimates and calculations. analysis, are subjective in nature. Through our risk assessment comparing those to the discount rates selected procedures, we identified those inputs to the goodwill by management. impairment analysis that were the most sensitive which enabled –– We compared the long-term growth rates to independent us to design our audit procedures to address the higher risk market data. areas in our work, focusing on those estimates that are either –– We analysed the actual results between the date of the complex, including the discount rate calculations, or subjective impairment test and the balance sheet date to determine in nature, including the short-term forecast and long-term if any additional indicators of impairment existed. growth rates. –– We evaluated the Group’s disclosures on goodwill against the requirements of IFRS.

TAXATION (Refer to the Accounting Policies and Note 7 to the financial statements, and the Audit Committee Report)

The Group is subject to corporate taxes in a number of different Our audit procedures related to the valuation and allocation of We determined the jurisdictions with complex tax laws and regulations. Tax reserves taxation reserves included the following, among others: tax reserves to be are required to be recorded in relation to uncertain tax positions, –– We tested the effectiveness of controls over management’s appropriate based on which are based on management’s identification of relevant valuation of the reserves and over the monitoring of exposures our audit procedures. jurisdictions, interpretation of tax law and understanding of the related to tax audits. approach of the local tax authorities. In many cases, there is a –– We evaluated management’s assessment of the impact of range of potential outcomes which must be considered. developments during the period in international tax rules on the Group. We identified the valuation and allocation of reserves for taxes –– We evaluated management’s calculations of uncertain tax as a key audit matter because of the multiple jurisdictions in provisions arising from the risk of tax authority challenge of which the Group files its tax returns and the complexity of historical arrangements and tested the assumptions made in relevant tax laws and regulations. This required a high degree those calculations. of auditor judgement and an increased extent of effort, –– With the assistance of our tax specialists, we tested the including involvement of our tax specialists when performing estimates made by management in determining the audit procedures to challenge the appropriateness of reserves by: management’s estimates of tax reserves. –– Evaluating the assumptions used in the Group’s analysis of uncertain tax positions based on knowledge of the Group and relevant tax regimes. –– Reading the Group’s correspondence with tax authorities in significant locations to determine whether any other tax exposure exists and whether the amounts provided for appear reasonable and the appropriate recognition criteria has been met. –– Reading the tax opinions provided by external legal counsel. –– Evaluating historical settlement amounts to determine whether management has been adequately provided in the past. –– We also assessed the disclosure in the financial statements in relation to the requirements of IFRS.

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Key audit matter How the scope of our audit responded to the key audit matter Key observations

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Refer to the Accounting Policies and Note 12 to the financial statements, and the Audit Committee Report)

Following the Group’s announcement of the proposed sale of the Our audit procedures related to the Kantar disposal were as We determined the Kantar business to Bain Capital in July 2019, Kantar was classified follows, among others: accounting for assets as held for sale and reported as a discontinued operation under –– We tested the effectiveness of controls established to held for sale and IFRS 5 Non-current Assets Held for Sale and Discontinued identify, authorise and approve, account for and disclose discontinued Operations. On 5 December 2019 the first stage of the transaction the disposal transaction in the financial statements. operations to be completed, which involved the sale of approximately 90% of the –– We performed procedures to test the calculation of the appropriate based on Kantar group. The gain recognised on the sale of the gain recognised at the disposal date. our audit procedures. discontinued operations was £74 million. –– We assessed the appropriateness of the Group’s treatment of variable elements of consideration. Particular complexities associated with the Kantar disposal were: –– We utilised technical accounting specialists to assess the –– The agreement to provide certain post disposal services as transition service agreements in order to determine the part of the transition agreement within the overall disposal appropriate accounting and subjected the estimates agreement required significant judgement in determining the determined by management to our audit procedures. appropriate accounting treatment. –– We analysed the terms of the disposal agreement. –– The overall gain on disposal involved a number of judgements, –– We read the minutes of the Board of Directors which particularly related to contingent consideration. evidenced authorization and approval of the transaction. –– We performed procedures to test the effectiveness of Due to the complexity and inherent judgement associated with internal controls specific to IFRS 5. the Group’s accounting treatment for consideration as defined within the transition service agreements and the determination of contingent consideration per the disposal agreement, we have identified the Kantar disposal as a key audit matter.

GOING CONCERN (Refer to the Accounting Policies and Note 26 to the financial statements, and the Audit Committee Report)

The Board of Directors has concluded that there are no material We performed the following audit procedures which consider Based on our uncertainties that give rise to significant doubt over the Group’s the impact of the uncertainty of the COVID-19 pandemic, procedures, we ability to continue as a going concern for at least twelve months among others: determined that the from the date of the approval of the financial statements. –– We tested the effectiveness of controls over management’s Board of Directors’ going concern models, including the review of the inputs and conclusion that there Given the inherent uncertainty associated with COVID-19, it is assumptions used in those models, and the review of going are no material currently difficult to determine a reasonable worst case scenario. concern disclosures. uncertainties that Accordingly, management modelled a range of scenarios. These –– We utilised our internal transaction specialists to assess the give rise to significant included a scenario which assumed a year-on-year decline of appropriateness of forecast assumptions by: doubt over the Group over 35% in revenue less pass through costs as defined in Note 2 –– Reading analyst reports, industry data and other external and the Parent Segment Information. The directors determined that the information to determine if it provided corroborative or Company’s ability to likelihood of the Group breaching its banking covenants as at contradictory evidence in relation to management’s continue as a going 31 December 2020 and not having access to sufficient liquidity assumptions. concern to be for at least twelve months from the date of signing the financial –– Comparing forecasted sales to recent historical financial appropriate. statements is remote considering the decline in revenue less information. pass through costs required and the mitigating actions available –– Enquiring of management regarding the mitigating to management, including the suspension of share buy-backs actions to reduce costs and manage cash flows and and the final dividend. assessing whether the mitigating actions were within the Company’s control. As a result of the uncertainty as to the impact of COVID-19 on –– We tested the underlying data generated to prepare the the Group, we identified a key audit matter related to going forecast scenarios and determined whether there was adequate concern due to the significant judgement required to conclude support for the assumptions underlying the forecast. that there is not a material uncertainty related to going concern, –– We read the terms of the revolving credit facility to obtain an in particular the judgement that the likelihood of the Group understanding of the debt covenants. experiencing a decline in revenue less pass through costs that –– We evaluated the Group’s disclosures on going concern would result in a breach of its banking covenants at 31 December against the requirements of IAS 1 and ISA 570. 2020 is remote.

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OUR APPLICATION OF MATERIALITY We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group materiality Group Parent Company £55m financial statements financial statements

Materiality £55 million £22 million (2018: £80 million) (2018: £32 million) PBT £982.1m

Basis for 5.6% of pre-tax profit from The basis for materiality Audit Committee determining continuing operations is shareholder's equity. reporting threshold materiality (2018: 5.5% of pre-tax profit) In our determination £1.5m we use 40% of Group materiality as the PBT Group materiality maximum threshold. The materiality used is less than 1% of shareholder's We set performance materiality at £33 million (2018: £52 million) which is equity (2018: less than 1% lower than Group materiality to reduce the probability that, in aggregate, of shareholder’s equity). uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 60% Rationale We have determined that the critical Due to the nature of of Group materiality for the 2019 audit (2018: 65%). In determining performance for the benchmark for the Group was pre-tax the Company as a materiality, we considered factors including: benchmark profit from continuing operations parent entity holding applied because we consider this measure to company, we consider –– our risk assessment, including our assessment of the Group’s overall control be the primary focus of users of the shareholder's equity environment and that we consider it appropriate to rely on controls financial financial statements. The reduction in to be the most processes and systems; and materiality compared to the prior year appropriate basis for –– our past experience of the audit, which has indicated a low value of reflects the presentation of the Kantar materiality. Materiality corrected and uncorrected misstatements identified in prior periods. businesses in discontinued operations. is capped at 40% of Group materiality We agreed with the Audit Committee that we would report to the Committee (2018: 40% of Group all audit differences in excess of £1.5 million (2018: £1.5 million), as well as materiality). differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

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AN OVERVIEW OF THE SCOPE OF OUR AUDIT In connection with our audit of the financial statements, our responsibility In selecting the components that are in scope each year, we refresh and is to read the other information and, in doing so, consider whether the update our understanding of the Group and its environment, including other information is materially inconsistent with the financial statements obtaining an understanding of the Group’s system of internal controls, and or our knowledge obtained in the audit or otherwise appears to be assessing the risks of material misstatement at the Group level, in order to materially misstated. ensure that the components selected for audit provide an appropriate basis on which to undertake audit work to address the identified risks of material If we identify such material inconsistencies or apparent material misstatement. Such audit work represents a combination of procedures, misstatements, we are required to determine whether there is a material all of which are designed to target the Group’s identified risks of material misstatement in the financial statements or a material misstatement of the misstatement in the most effective manner possible. other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are Those entities subjected to audit represented 75% of the Group’s required to report that fact. consolidated revenue from continuing operations (2018: 76% of the Group’s consolidated revenue) and 92% of the Group’s consolidated operating profit In this context, matters that we are specifically required to report to you as from continuing operations (2018: 81% of the Group’s consolidated operating uncorrected material misstatements of the other information include where profit); achieved through a combination of direct testing and specified audit we conclude that: procedures, including substantive analytical review procedures, performed by the Group auditor and component auditors across the world. Our audit –– Fair, balanced and understandable – the statement given by the directors work at the components is executed at levels of materiality appropriate for that they consider the Annual Report and financial statements taken as a such components, many of which are local statutory materiality levels which whole is fair, balanced and understandable and provides the information in all instances are capped at 40% of Group materiality. necessary for shareholders to assess the Group’s position and performance, business model and strategy, is materially inconsistent with our knowledge Due to the disruption caused by COVID-19, there were certain components obtained in the audit; or within China which were removed from the scope of our audit procedures. –– Audit Committee reporting – the section describing the work of the Audit In order to support our conclusion that there were no significant risks of Committee does not appropriately address matters communicated by us material misstatement of the aggregated financial information of the to the Audit Committee; or remaining components, we tested the consolidation process and performed –– Directors’ statement of compliance with the UK Corporate Governance analytical procedures at both the Group level and component level for Code – the parts of the directors’ statement required under the Listing components deemed to be out-of-scope. Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor As the Group files its financial statements in the US, the Group is required to in accordance with Listing Rule 9.8.10R(2) do not properly disclose a comply with the US Sarbanes‑Oxley Act. Accordingly we perform testing of departure from a relevant provision of the UK Corporate Governance Code. the operating effectiveness of internal controls over financial reporting in all areas of the audit. We have nothing to report in respect of these matters.

HOW WE WORK CLOSELY WITH COMPONENT AUDITORS RESPONSIBILITIES OF DIRECTORS The Group audit team exercises its oversight of component auditors using a As explained more fully in the directors’ responsibilities statement, the carefully designed programme, which considers a variety of factors including directors are responsible for the preparation of the financial statements and the size of entity and number of significant risks. This programme is put in for being satisfied that they give a true and fair view, and for such internal place to ensure that appropriate guidance is provided to the component control as the directors determine is necessary to enable the preparation auditors through a combination of: of financial statements that are free from material misstatement, whether due to fraud or error. –– upfront planning meetings with all component teams; –– site visits; In preparing the financial statements, the directors are responsible for –– central review of documentation; and assessing the Group’s and the Parent Company’s ability to continue as a going –– risk assessment discussions and detailed workpaper reviews. concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to These are designed so that the Senior Statutory Auditor or a senior member of liquidate the Group or the Parent Company or to cease operations, or have the Group audit team visits all key locations across the Group on a regular basis. no realistic alternative but to do so. In addition we assess the competence of each of our component auditors. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT In years when we do not visit a key location we: OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial –– include the component audit partner in our team planning meeting; statements as a whole are free from material misstatement, whether due to –– discuss their risk assessment; and fraud or error, and to issue an auditor’s report that includes our opinion. –– review documentation of the findings from their work and discuss with Reasonable assurance is a high level of assurance, but is not a guarantee that them as needed. an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and We also hold quarterly meetings with management at a regional and global are considered material if, individually or in the aggregate, they could level in order to update our understanding of the Group and its environment reasonably be expected to influence the economic decisions of users taken on an ongoing basis. on the basis of these financial statements.

OTHER INFORMATION Details of the extent to which the audit was considered capable of detecting The directors are responsible for the other information. The other information irregularities, including fraud are set out below. comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ Our opinion on the financial statements does not cover the other information auditorsresponsibilities. This description forms part of our auditor’s report. and we do not express any form of assurance conclusion thereon.

192 WPP ANNUAL REPORT 2019 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WPP PLC FINANCIAL STATEMENTS

EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS OF DETECTING IRREGULARITIES, INCLUDING FRAUD OPINIONS ON OTHER MATTERS PRESCRIBED BY OUR We identify and assess the risks of material misstatement of the financial ENGAGEMENT LETTER statements, whether due to fraud or error, and then design and perform audit In our opinion the part of the Directors’ Remuneration report to be audited procedures responsive to those risks, including obtaining audit evidence that has been properly prepared in accordance with the UK Companies Act 2006 is sufficient and appropriate to provide a basis for our opinion. as if that Act had applied to the Company.

IDENTIFYING AND ASSESSING POTENTIAL RISKS RELATED In our opinion, based on the work undertaken in the course of the audit: TO IRREGULARITIES In identifying and assessing risks of material misstatement in respect of –– the information given in the Strategic Report and the Corporate irregularities, including fraud and non-compliance with laws and regulations, Governance Report for the financial year for which the financial statements our procedures included the following: are prepared is consistent with the financial statements; and –– the Strategic Report and the Corporate Governance Report have been –– the nature of the industry and sector, control environment and business prepared in accordance with applicable legal requirements. performance including the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets; In the light of the knowledge and understanding of the Group and of the –– the Group’s own assessment of the risks that irregularities may occur either as Parent Company and their environment obtained in the course of the audit, we a result of fraud or error that was approved by the board on 12 December 2019; have not identified any material misstatements in the strategic report or the –– enquiring of management, the Group’s general counsel, internal audit and directors’ report. the Audit Committee, including obtaining and reviewing supporting documentation, concerning the Group’s policies and procedures relating to: MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION –– identifying, evaluating and complying with laws and regulations and ADEQUACY OF EXPLANATIONS RECEIVED AND ACCOUNTING whether they were aware of any instances of non-compliance; RECORDS –– detecting and responding to the risks of fraud and whether they have Under the Companies (Jersey) Law 1991 we are required to report to you if, knowledge of any actual, suspected or alleged fraud; in our opinion: –– the internal controls established to mitigate risks related to fraud or –– we have not received all the information and explanations we require for non-compliance with laws and regulations; our audit; or –– discussing among the engagement team including significant component –– proper accounting records have not been kept by the Parent Company, audit teams and involving relevant internal specialists, including tax, or returns proper for our audit have not been received from branches not valuations, pensions and IT specialists regarding how and where fraud visited by us; or might occur in the financial statements and any potential indicators of fraud. –– the Parent Company financial statements are not in agreement with the As part of this discussion, we identified potential for fraud in management accounting records and returns. override of controls; and –– obtaining an understanding of the legal and regulatory frameworks that the We have nothing to report in respect of these matters. Group operates in, focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the DIRECTORS’ REMUNERATION operations of the Group. The key laws and regulations we considered in this Under our engagement letter we are also required to report if in our opinion context included Securities and Exchange Commission rules, Securities Law certain disclosures of directors’ remuneration have not been made or the part in the UK and US, the UK Listing Rules, European Union Law, Companies of the directors’ remuneration report to be audited is not in agreement with (Jersey) Law and tax legislation in the Group’s various jurisdictions. In the accounting records and returns. addition, compliance with the Group’s regulatory solvency requirements, the US Foreign Corrupt Practices Act and the UK Bribery Act were We have nothing to report in respect of these matters. fundamental to the Group’s ability to continue as a going concern. OTHER MATTERS AUDIT RESPONSE TO RISKS IDENTIFIED AUDITOR TENURE As a result of performing the above, we identified goodwill as a key audit Following the recommendation of the Audit Committee, we were appointed matter related to the potential risk of fraud. The key audit matters section of by the Company at the Annual General Meeting on 20 May 2002 to audit the our report explains the matter in more detail and also describes the specific financial statements for the year ending 31 December 2002 and subsequent procedures we performed in response to that key audit matter. financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 18 years, covering the Our procedures to respond to risks identified included the following: years ending 31 December 2002 to 31 December 2019. –– reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations CONSISTENCY OF THE AUDIT REPORT WITH THE ADDITIONAL described as having a direct effect on the financial statements; REPORT TO THE AUDIT COMMITTEE –– enquiring of management, the Audit Committee and internal and external Our audit opinion is consistent with the additional report to the Audit legal counsel concerning actual and potential litigation and claims; Committee we are required to provide in accordance with ISAs (UK). –– performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; USE OF OUR REPORT –– reading minutes of meetings of those charged with governance, reviewing This report is made solely to the company’s members, as a body, in internal audit reports and reviewing correspondence with relevant tax accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit authorities; and work has been undertaken so that we might state to the company’s members –– in addressing the risk of fraud through management override of controls, those matters we are required to state to them in an auditor’s report and/or testing the appropriateness of journal entries and other adjustments; those matters we have expressly agreed to report to them in our engagement assessing whether the judgements made in making accounting estimates letter and for no other purpose. To the fullest extent permitted by law, we do are indicative of a potential bias; and evaluating the business rationale of not accept or assume responsibility to anyone other than the company and the any significant transactions that are unusual or outside the normal course company’s members as a body, for our audit work, for this report, or for the of business. opinions we have formed.

We also communicated relevant identified laws and regulations and potential Robert Topley, FCA fraud risks to all engagement team members including internal specialists and For and on behalf of Deloitte LLP significant component audit teams, and remained alert to any indications of Recognized auditor fraud or non-compliance with laws and regulations throughout the audit. London, United Kingdom 29 April 2020

WPP ANNUAL REPORT 2019 193 ADDITIONAL INFORMATION

194 WPP ANNUAL REPORT 2019

ADDITIONAL INFORMATION

Taskforce on Climate-related Financial Disclosures 196

Other statutory information 198

Five-year summary 201

Information for shareholders 202

Financial glossary 204

Where to find us 206

WPP ANNUAL REPORT 2019 195 ADDITIONAL INFORMATION

TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT

We support the Taskforce on Climate-related Financial Disclosures IDENTIFYING CLIMATE RISK AND OPPORTUNITY and aim to develop our disclosures in line with its recommendations. Sustainability risks are integrated into our overall risk management This voluntary framework seeks to encourage businesses to disclose processes. Performance and updated risk implications are reviewed climate-related risks and opportunities and is structured around four by the Audit Committee on a regular basis. Assessment of risk is themes: governance, strategy, risk management, and metrics and informed by feedback from investors, clients and our people. Our targets. Our disclosure, across these four themes, is set out below. overall risk management process is outlined on pages 80-91. Following a review of risk management in 2018, Risk Committees WPP’s overall approach to risk management and a summary of our were established in our operating companies in 2019 with the aim principal risks can be found on pages 80-91 of our Annual Report. of ensuring accountability at the network level to monitor risk and Our CDP response provides further disclosures on our approach compliance. In 2020, the Risk Committees will conduct a review to climate change and is available at https://www.cdp.net/en. of network-level climate risk and opportunity.

GOVERNANCE The Sustainability Committee reviews WPP’s climate-related risks Our CEO has overall responsibility for climate-related risks and and opportunities on an annual basis. This analysis of risk is informed opportunities. At Board level, we established a Sustainability by interviews with sustainability and consumer experts from within Committee in 2019. The Committee includes three Non-Executive WPP’s agencies and external data sources including Maplecroft’s Directors and is attended as requested by our Chief Executive, Climate Change Exposure Index and the IPCC Representative Group Chief Counsel and Head of Sustainability, Global Sustainability Concentration Pathways (RCPs). Factors considered include Director and other executives. The Committee meets at least four regulatory requirements, reputational risk, physical risks, and times a year and its remit includes reviewing our sustainability opportunities to advise our clients. Evaluation criteria include strategy and evaluating our performance against targets and relevance to our industry, relevance to sustainability, regulatory and commitments. As our clients integrate climate adaptation and legal risks, financial implications and the operations affected. In 2020, mitigation into their business strategies, the Committee will review we will conduct a qualitative scenario analysis against a pathway the growth of services which maximise their success. It will also limiting warming to 2° Celsius to inform future assessment. review climate adaptation and transition plans, including steps to ensure that our Campuses and offices are resilient to extreme weather and that we are meeting growing regulatory requirements that face both WPP and its clients.

In 2019, we also established an Executive Committee working group on sustainability to guide our strategy and oversee our approach across agencies. This group includes WPP’s Chief Financial Officer, Chief Marketing and Growth Officer, Group Chief Counsel and Head of Sustainability, and two agency CEOs. The wider Executive Committee includes the leaders of WPP’s largest agencies and Group Functional leaders. To support the broadening of their remit, senior leaders will receive climate crisis training. This will outline the risks and opportunities that climate change poses to WPP and its largest clients, while enabling our leaders to take progressive measures to mitigate climate risk in their operations and maximise commercial opportunities.

196 WPP ANNUAL REPORT 2019 TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES STATEMENT ADDITIONAL INFORMATION

CLIMATE CHANGE AND OUR STRATEGY KEY The nature of the risks and opportunities that we face depends not Risk just on the physical aspects of climate change, but on the trajectory our clients take in adapting their business models, regulations in the Opportunity markets we operate in, and our ability to understand and shape a culture of climate action. Our response to our principal climate risks and opportunities involves a range of WPP Group functions and responses by our companies.

PRINCIPAL RISK OR OPPORTUNITY POTENTIAL IMPACT HOW IT IS MANAGED PHYSICAL RISKS AND OPPORTUNITIES

Increased frequency of extreme weather and This includes storms, flooding, wildfires and Our strategy of co-locating our people in climate-related natural disasters water and heat stress which can damage our WPP Campuses is enabling us to centralise buildings, jeopardise the safety of our people emergency preparedness procedures. It will and significantly disrupt our operations. also enable us to more efficiently deploy At present 9% of our headcount are located in climate mitigation measures. We intend to countries at “extreme” risk from the physical further explore the exposure of our assets to impacts of climate change in the next 30 years. the physical impacts of climate change using the IPCC’s RCPs utilising a 2° Celsius scenario analysis. Further details on our Campus strategy are outlined on page 40.

TRANSITION RISKS AND OPPORTUNITIES Increased demand for sustainable products and One in five of our top 50 clients has made a WPP’s agencies continue to develop products services from consumers and clients carbon neutral commitment. Consumers and services which enable our clients to adopt increasingly seek sustainable brands. Climate leadership positions on climate change and strikes, other mass movements and devastating exceed the expectations of consumers. climate-related natural disasters are fuelling demands for immediate and ambitious action To ensure our leaders are confident in from businesses and governments. communicating on climate change we will be running climate crisis training in 2020. Sustainability will also be integrated into our global How We Behave training in 2020 and will be delivered to all new employees.

Further details of our climate-related client work can be found in our Sustainability Report.

Increased reputational risk associated with As consumer consciousness around climate Our climate crisis training will ensure that working on environmentally detrimental change rises, our sector is seeing increased our people recognise the importance of our client briefs scrutiny of our role in driving unsustainable sector’s role in addressing the climate crisis. It consumption. Our clients seek expert partners will be part of a broader sustainability training who can give recommendations that take programme which we will run in multiple into account stakeholder concerns around markets with localised content in key regions. climate change. We are also developing internal tools to help Additionally, WPP serves some clients whose our people identify environmentally harmful business models are under increased scrutiny. briefs. These tools will embed climate-related This creates both a reputational and related issues within existing content-review financial risk for WPP if we are not rigorous in procedures across the organisation our content standards as we grow our sustainability-related services.

Achieving resource efficiencies through cutting We continue in our long-standing commitment Through our Campus strategy, all buildings with our carbon footprint and improving energy to tackling our own carbon footprint. This has a floor space exceeding 50,000 square feet will efficiency created a significant resource and cost be certified to advanced sustainability efficiency opportunity for WPP as we achieve standards including LEED and BREEAM. We greater energy efficiency across our offices. estimate that this reduces energy consumption by 21% per location. By the end of 2020 over 25% of our floorspace should be certified.

MONITORING OUR PROGRESS We have been reporting on a range of climate change indicators renewable sources by 2025, and to improve energy efficiency. since 2006 and have an ambitious Scope 1 and 2 carbon reduction We met our 2020 target to certify 25% of our floorspace to advanced target, in line with climate science. We have set a new goal to be sustainability standards by the end of 2020 a year early, in 2019. Our carbon neutral across our Campuses by 2025. A summary is provided most material climate-related opportunities relate to our client work. on page 72 with further information in our Sustainability Report. We Examples of work relating to climate change are included in our have also set a new target to source 100% of our electricity from downloadable Sustainability Report 2019: wpp.com/sustainability.

WPP ANNUAL REPORT 2019 197 ADDITIONAL INFORMATION

OTHER STATUTORY INFORMATION

SUBSTANTIAL SHAREHOLDERS ARTICLES OF ASSOCIATION As at 31 March 2020, the Company is aware of the following interests of 3% or There are no restrictions on amending the Articles of Association of the more in the issued ordinary share capital: Company other than the requirement to pass a special resolution of the shareholders.

MFS 3.96% SHARE CAPITAL Harris Associates LP 5.88% The Company’s authorised share capital consists solely of 1,750,000,000 ordinary 10 pence shares. The Company operates an American Depositary BlackRock Inc 7.60% Receipt programme. The rights and obligations relating to the ordinary share capital are outlined in the Articles of Association; there are no restrictions on The disclosed interests refer to the respective combined holdings of the entity transfer, no restrictions on voting rights and no securities carry special voting and to interests associated with it. rights with regard to control of the Company. The Company has not been notified of any other holdings of ordinary share At the AGM on 12 June 2019, shareholders passed resolutions authorising capital of 3% or more. the Company, in accordance with its Articles of Association, to allot shares PROFITS AND DIVIDENDS up to a maximum nominal amount of £42,020,728 of which £6,309,418 could be allotted for cash free of statutory pre-emption rights. In the year under The profit before tax of continuing operations for the year was £982.1 million review no shares were issued for cash free from pre-emption rights. Details (2018: £1,257.6 million). Given the significant uncertainty over the coming of share capital movements are given in note 28 of the financial statements months, we are taking prudent action now to maintain our liquidity and on pages 177-179. ensure that we emerge from this global crisis strong, secure, and ready to meet the continuing needs of our clients, shareholders and other stakeholders. Therefore, the Board is suspending the 2019 final dividend of 37.30p per share, AUTHORITY FOR PURCHASE OF OWN SHARES At the AGM on 12 June 2019, shareholders passed a special resolution which was due to be proposed at the 2020 AGM. The interim ordinary authorising the Company, in accordance with its Articles of Association, to dividend of 22.70p per share was paid on 4 November 2019. purchase up to 126,188,373 of its own shares in the market. In the year under review, 4,586,039 ordinary shares were purchased. In 2018, the Directors declared a final dividend of 37.30p per share which, together with the interim ordinary dividend of 22.70p makes a total of 60.00p for the year. LISTING RULES – COMPLIANCE WITH LR 9.8.4R

Applicable sub-paragraph CHANGE OF CONTROL Section within LR 9.8.4R Location All of our bonds contain provisions which are triggered on a change of control 2 Publication of unaudited Immediately below of the Company. The holders of such bonds have the right to repayment at par financial information except for holders of our US$ bonds. The holders of our US$ bonds have the 4 right to redeem the bonds at 101% of par, if the Company is non-investment Details of long-term Directors’ Remuneration report, incentive schemes pages 129 and 130 grade at the time of the change of control or becomes non-investment grade within 120 days of the announcement of the change of control. The above table sets out only those sections of LR 9.8.4R which are relevant. The remaining sections of LR 9.8.4R are not applicable. In addition, the Group has a Revolving Credit Facility in the amount of $2,500 million due March 2024, the terms of which require the consent of the PUBLICATION OF UNAUDITED FINANCIAL INFORMATION majority of the lenders if a proposed merger or consolidation of the Company In the Circular to Shareholders for the Proposed Transaction in respect of the would alter its legal personality or identity. On 14 February 2020, the lending Kantar Business dated 7 October 2019, the Company reiterated the following banks approved an extension of the term of the Revolving Credit Facility to guidance that it had previously provided in respect of the financial targets for 15 March 2025. the Company for the year ending 31 December 2019:

In general terms, awards granted under WPP’s incentive plans will usually vest (a) “Like-for-like revenue less pass-through costs down 1.5% to 2.0%”; and on a change of control, albeit on a prorated basis. Where awards are subject to performance conditions, those conditions will still need to be met, also on (b) “Headline operating margin to revenue less pass-through costs down a prorated basis. Certain incentive plans allow the Compensation Committee around 1.0 margin point on a constant currency basis (excluding the impact to require outstanding awards to be exchanged for equivalent awards in the of IFRS 16 Leases)”, (together, the “Profit Forecast”). acquiring company. The above statements represented a profit forecast under the Listing Rules. The Profit Forecast was compiled based on the existing WPP Group at that time, and as such included both the year to date performance and projected performance of Kantar for the year ending 31 December 2019. On this basis, like-for-like revenue less pass-through costs were down 1.2% and headline operating margin to revenue less pass-through costs was down 0.9 margin points for the year-ended 31 December 2019. This results in the implied profit being within 10% of the profit forecast.

198 WPP ANNUAL REPORT 2019 OTHER STATUTORY INFORMATION ADDITIONAL INFORMATION

EMISSIONS CO2e EMISSIONS BREAKDOWN (TONNES OF CO2e) 2017 (target Emissions source 2019 2018 base year) 2016 2015 Continuing operations

Scope 1 Stationary fuel combustion 6,841 7,309 5,997 6,109 5,649 Total scope 1 6,841 7,309 5,997 6,109 5,649 Scope 2 emissions from standard electricity Scope 2 (location based) 51,434 66,848 96,265 103,071 97,705 Scope 2 emissions from green and renewable electricity (location based) 27,324 26,370 11,604 14,425 21,723 Scope 2 emissions from heat and steam (location based) 1,820 1,925 1,596 1,499 n/a

Total scope 2 (location-based) 80,578 95,143 109,465 118,995 119,428 Scope 2 emissions from standard electricity (market based) 55,763 71,905 82,996 94,331 97,705 Scope 2 emissions from green and renewable electricity (market based) 0 0 0 0 0 Scope 2 emissions from heat and steam (market based) 1,820 1,925 1,596 1,499 n/a Total scope 2 (market-based) 57,583 73,830 84,592 95,830 97,705

Total scope 1 and 2 Total scope 1 and 2 CO2e emissions (location-based) 87,419 102,452 115,462 125,104 125,077

Total scope 1 and 2 CO2e emissions (market-based) 64,424 81,139 90,589 101,939 103,354 Scope 3 Business air travel 65,014 69,425 74,151 75,157 79,328 Total scope 3 65,014 69,425 74,151 75,157 79,328 Discontinued operations

Total scope 1 and 2 CO2e emissions Total scope 1 and 2 (location-based) 19,154 20,633 25,096 29,594 36,856 Total scope 1 and 2 CO2e emissions (market-based) 17,769 18,724 19,384 22,818 27,999

Scope 3 Business air travel 14,635 16,034 15,367 17,288 19,557 Total scope 3 14,635 16,034 15,367 17,288 19,557 Overall total (Continuing and discontinued operations)

Total scope 1 and 2 CO2e emissions Total scope 1 and 2 (location-based) 106,573 123,065 140,558 154,698 161,933

Total scope 1 and 2 CO2e emissions (market-based) 82,193 99,863 109,973 124,757 131,353 Scope 3 Business air travel 79,649 85,459 89,518 92,445 98,885 Total scope 3 79,649 85,459 89,518 92,445 98,885

WPP'S CARBON INTENSITY FROM CONTINUING OPERATIONS (TONNES OF CO2e) 2017 (target Intensity metric 2019 2018 base year) 20161 20151 Total scope 1 and 2 Tonnes per full-time employee (market based) 0.60 0.76 0.85 0.94 1.05 Tonnes per £million revenue (market based) 4.87 6.22 6.89 8.38 10.74 Scope 3 Tonnes per full time employee 0.61 0.65 0.70 0.70 0.79

Note 1 Continuing and discontinued operations.

NOTES TO CARBON EMISSIONS STATEMENT 2019 Our carbon emissions statement has been prepared in accordance with the line with our share in the outgoing business. Our continuing operations Greenhouse Gas Protocol and aligns with the scope 2 market-based emissions include all remaining WPP agencies. In line with the guidance on disposals methodology guidance. in the Greenhouse Gas Protocol Corporate Accounting Guidelines we have recalculated our 2030 target baseline data to exclude Kantar’s operations. Our reporting incorporates carbon dioxide equivalent emissions from building This covers 106,000 FTE employees. Associate companies are excluded. energy use and business air travel. Emissions data is included for all operations for which WPP and its subsidiaries have operational control. Associate Our carbon data is reviewed by Bureau Veritas, an independent assurance Companies are excluded. Due to the sale of the Kantar business our carbon provider. See its Independent Verification Statement on our website emissions statement separates our results into totals from continuing and wpp.com/sustainability. Additional information on our carbon emissions discontinued operations. Under discontinued operations we have accounted methodology is included in our Sustainability Report. for full emissions until November 2019 and 10% until end of the year which is in

WPP ANNUAL REPORT 2019 199 ADDITIONAL INFORMATION OTHER STATUTORY INFORMATION

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE PREPARATION OF FINANCIAL STATEMENTS The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations. The Directors have elected to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and have also elected to prepare financial statements for the Company in accordance with UK accounting standards. Company law requires the Directors to prepare such financial statements in accordance with the Companies (Jersey) Law 1991.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s “Framework for the Preparation and Presentation of Financial Statements”.

In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. Directors are also required to: –– properly select and apply accounting policies; –– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; –– provide additional disclosures, when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and –– make an assessment of the Company’s ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors’ report and Directors’ Compensation Report.

The Directors are responsible for the maintenance and integrity of the Company website. Jersey legislation and UK regulation governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.

The Directors confirm that so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware. Each Director has taken all the steps that he or she ought to have taken, as a Director, in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

In accordance with the principles of the UK Corporate Governance Code, the Board has established arrangements to evaluate whether the information presented in the Annual Report is fair, balanced and understandable; these are described on page 109.

The Board considers the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

The letters from the Chairmen of the Sustainability, Nomination and Governance, Audit and Compensation Committees, the statements regarding Directors’ responsibilities and statement of going concern set out above and the Directors’ remuneration and interests in the share capital of the Company set out on pages 116-136 are included in the Directors’ report, which also includes the sections strategic report and corporate governance.

By Order of the Board

Balbir Kelly-Bisla Company Secretary 29 April 2020

200 WPP ANNUAL REPORT 2019 ADDITIONAL INFORMATION

FIVE-YEAR SUMMARY

Continuing and Continuing operations discontinued operations 2019 2018 20171 20161,2 20152 £m £m £m £m £m Income statement Continuing operations: Billings3 53,059.0 53,219.7 52,915.4 55,278.0 47,631.9 Revenue 13,234.1 13,046.7 13,146.4 14,887.3 12,235.2 Revenue less pass-through costs3 10,846.5 10,875.7 11,143.9 12,428.6 10,524.3 Operating profit 1,295.9 1,237.9 1,577.9 2,063.1 1,632.0 Headline EBITDA4 2,131.4 1,932.5 2,099.6 2,419.7 2,002.4 Headline operating profit4 1,560.6 1,651.2 1,793.1 2,095.3 1,705.2 Profit before taxation 982.1 1,257.6 1,746.9 1,890.5 1,492.6 Headline PBT4 1,363.0 1,543.0 1,717.6 1,986.2 1,622.3 Profit for the year 707.1 1,001.6 1,663.9 1,501.6 1,245.1

Headline operating profit margin4 14.4% 15.2% 16.1% 16.9% 16.2%

Balance sheet Non-current assets 15,886.8 17,924.3 18,506.0 19,125.3 15,373.8 Net current liabilities (178.6) (666.0) (357.7) (1,328.1) (840.1) Net assets 8,443.5 9,806.6 9,956.1 9,761.7 8,015.8 Net debt (1,539.6) (4,016.7) (4,483.1) (4,130.5) (3,210.8) Average net debt (4,282.0) (4,965.6) (5,142.7) (4,340.5) (3,562.3)

2019 2018 2017 2016 2015 Our people Revenue per employee (£000) 124.3 123.0 123.5 112.2 97.9 Revenue less pass-through costs3 per employee (£000) 101.8 102.5 104.7 93.7 84.2 Staff cost per employee (£000) 66.6 65.5 66.4 58.7 53.3 Average headcount5 106,498 106,090 106,414 132,657 124,930 Share information Headline6 – basic earnings per share from continuing operations 78.7p 92.4p 104.2p 114.8p 95.4p – diluted earnings per share from continuing operations 78.1p 91.4p 103.0p 113.2p 93.6p Reported – basic earnings per share from continuing operations 50.2p 75.1p 125.2p 109.6p 90.0p – diluted earnings per share from continuing operations 49.8p 74.3p 123.8p 108.0p 88.4p Dividends per share7 22.70p 60.00p 60.00p 56.60p 44.69p Share price – high 1,077.5p 1,471.0p 1,921.0p 1,850.0p 1,611.0p – low 800.4p 805.0p 1,253.0p 1,338.0p 1,304.0p Market capitalisation at year-end (£m) 13,410.0 10,682.6 17,029.8 23,260.3 20,236.9

Notes 1 2017 and 2016 figures were restated for the adoption of IFRS 15 Revenue from Contracts with Customers in the 2018 Annual Report & Accounts. No restatement has been made in 2015. 2  2016 and 2015 figures have not been re-presented in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations therefore represent total continuing and discontinued operations. 3  Billings and revenue less pass-through costs are defined on pages 204 and 205. 4  The calculation of ‘headline’ measures of performance (including headline EBITDA, headline operating profit, headline operating profit margin and headline PBT) is set out in note 32 of the financial statements. 5 2019, 2018 and 2017 average headcount excludes the Kantar disposal group. 6 Headline earnings per share is set out in note 9 of the financial statements. 7  Dividends per share represents the dividends declared in respect of each year. Given the significant uncertainty over the coming months, we are taking prudent action now to maintain our liquidity and ensure that we emerge from this global crisis strong, secure, and ready to meet the continuing needs of our clients, shareholders and other stakeholders. Therefore, the Board is suspending the 2019 final dividend of 37.30p pence per share, which was due to be proposed at the 2020 AGM.

The information on this page is unaudited.

WPP ANNUAL REPORT 2019 201 ADDITIONAL INFORMATION

INFORMATION FOR SHAREHOLDERS

SHAREHOLDERS’ REGISTER A register of shareholders’ interests is kept at the Company’s registrar’s office in Jersey and is available for inspection on request. The register includes information on nominee accounts and their beneficial owners.

ANALYSIS OF SHAREHOLDINGS AT 31 DECEMBER 2019 Issued share capital as at 31 December 2019: 1,328,167,813 ordinary shares (following the buyback of 261,178 shares on 30 December 2019 and 96,280 shares on 31 December 2019).

Number of shares held Number of holders % owners Shareholdings % outstanding1 1-100 2,281 19.8% 77,084 0.0% 101-250 1,301 11.3% 229,222 0.0% 251-500 1,291 11.2% 484,449 0.0% 501-1,000 1,121 9.7% 843,859 0.1% 1,001-5,000 1,746 15.1% 4,240,821 0.3% 5,001-10,000 628 5.4% 4,494,479 0.3% 10,001-25,000 766 6.6% 12,574,246 0.9% 25,001-50,000 566 4.9% 20,289,478 1.5% 50,001-100,000 566 4.9% 40,217,924 3.0% 100,001-500,000 845 7.3% 192,999,788 14.5% 500,001-1,000,000 217 1.9% 154,705,258 11.6% 1,000,001-2,000,000 107 0.9% 153,258,189 11.5% 2,000,001-3,000,000 45 0.4% 109,637,849 8.4% 3,000,001-4,000,000 26 0.2% 91,825,225 7.0% 4,000,001 and above 51 0.4% 542,647,400 40.9% Total 11,557 100.0% 1,328,525,2712 100.0%

1 All calculations are based on the percentage outstanding on the share register as of 31 December 2019. 2 Total includes 261,178 shares bought back by WPP on 30 December 2019 and 96,280 shares bought back by WPP on 31 December 2019.

Shareholders by geography % Shareholders by type % UK 28.1 Institutional investors 95.4 United States 35.6 Our people 0.9 Rest of World 36.3 Other individuals 3.7 Total 100 Total 100

Shareholders by geography % Shareholders by type %

UK 28.1% 35.6% 36.3% Institutional investors 95.4% 0.9% 3.7% United States Employees1 Rest of World Other individuals

1 In addition, as at 31 December 2019, 2.0% of the Company’s share capital (excluding treasury shares) is under option to our people.

DIVIDENDS Ordinary shareholders have received the following dividends in respect of each financial year:

20191 2018 2017 2016 2015 Interim dividend per ordinary share 22.70p 22.70p 22.70p 19.55p 15.91p Final dividend per ordinary share – 37.30p 37.30p 37.05p 28.78p Total 22.70p 60.00p 60.00p 56.60p 44.69p

1 Given the significant uncertainty over the coming months, we are taking prudent action now to maintain our liquidity and ensure that we emerge from this global crisis strong, secure, and ready to meet the continuing needs of our clients, shareholders and other stakeholders. Therefore, the Board is suspending the 2019 final dividend of 37.30p pence per share, which was due to be proposed at the 2020 AGM.

202 WPP ANNUAL REPORT 2019 INFORMATION FOR SHAREHOLDERS ADDITIONAL INFORMATION

FINANCIAL CALENDAR AMERICAN DEPOSITARY RECEIPTS (ADRS) Interim statements for the half-year ending 30 June are issued in August. Each ADR represents five ordinary shares.

Quarterly trading announcements are issued in April and October. WPP plc is subject to the informational requirements of the United States’ securities laws applicable to foreign companies and files an annual report Interim dividends are paid in November. on Form 20-F and other information with the US Securities and Exchange Commission. These documents are available at the Commission’s website, Preliminary announcements of results for the financial year ending sec.gov. Our reports on Form 20-F are also available from our Investor Relations 31 December are issued in the first quarter. department in New York.

Annual Reports are published in April. ADR DIVIDENDS ADR holders are eligible for all stock dividends or other entitlements accruing Annual General Meetings are held in London in June. on the underlying WPP plc shares and receive all cash dividends in US dollars. These are normally paid twice a year. SHARE PRICE The closing price of the shares at 31 December was as follows: Dividend cheques are mailed directly to the ADR holder on the payment date if ADRs are registered with WPP’s US depositary. Dividends on ADRs that are At 24 April registered with brokers are sent to the brokers, who forward them to ADR 2020 2019 2018 2017 2016 2015 holders. WPP’s US depositary is Citibank N.A. (address above). Ordinary 10p shares 545.0p 1,066.5p 846.6p 1,341.0p 1,816.0p 1,563.0p Dividends per ADR in respect of each financial year are set out below. Share price information is also available online at wpp.com/investors/share-price 20191 2018 2017 2016 2015 In £ sterling ONLINE INFORMATION Interim 113.50p 113.50p 113.50p 97.75p 79.55p WPP’s public website, wpp.com, provides current and historical financial Final – 186.50p 186.50p 185.25p 143.90p information, news releases, trading reports and share price information. Go to wpp.com/investors Total 113.50p 300.00p 300.00p 283.00p 223.45p

ACCESS NUMBERS/TICKER SYMBOLS In US dollars2 Interim 144.88¢ 151.53¢ 146.27¢ 132.42¢ 121.62¢ NYSE Reuters Bloomberg Final – 249.00¢ 240.34¢ 250.96¢ 219.99¢ Ordinary shares – WPP.L WPP LN Total 144.88¢ 400.53¢ 386.61¢ 383.38¢ 341.61¢ American Depositary Shares WPP WPP.N WPP US 1 Given the significant uncertainty over the coming months, we are taking prudent action now to maintain our liquidity and ensure that we emerge from this global crisis strong, secure, and ready to meet the continuing needs of our clients, shareholders and other stakeholders. Therefore, the REGISTRAR AND TRANSFER OFFICE Board is suspending the 2019 final dividend of 37.30p pence per share, which was due to be Computershare Investor Services (Jersey) Limited proposed at the 2020 AGM. 2  These figures have been translated for convenience purposes only, using the approximate Queensway House average rate for the year of US$1.2765 (2018: US$1.3351, 2017: US$1.2887). This conversion should Hilgrove Street not be construed as a representation that the pound sterling amounts actually represent, or could St Helier be converted into, US dollars at the rates indicated. Jersey JE1 1ES Dollar amounts paid to ADR holders depend on the sterling/dollar exchange Enquiry number: 0870 707 1411 rate at the time of payment.

AMERICAN DEPOSITARY RECEIPTS (ADRS) OFFICE No withholding tax is imposed on dividends paid to ADR holders and there will Citibank N.A. be no entitlement to offset any part of the notional UK taxation credit against PO Box 43077 any United States’ taxation liability. The dividends received will be subject to Providence United States’ taxation. RI 02940-3077 TAX INFORMATION Telephone enquiries: within the United States +1 877 248 4237 UK TAXATION Telephone enquiries: outside the United States +1 781 575 4555 Dividends received from 6 April 2018 Email enquiries: [email protected] UK resident individuals receive a Dividend Allowance in the form of a 0% tax rate on the first £2,000 of dividend income received each tax year. WPP REGISTERED OFFICE Queensway House Any dividends received over the Dividend Allowance are taxed at a rate of Hilgrove Street 7.5% on dividend income for individuals in the basic rate band, 32.5% for higher St Helier rate tax payers and at 38.1% for individuals with income of £150,000 or more. Jersey JE1 1ES Capital gains tax The market value of an ordinary share at 31 March 1982 was 39p. Since that date The Company’s registered number is 111714. rights issues have occurred in September 1986, August 1987 and April 1993. For capital gains tax purposes the acquisition cost of ordinary shares is adjusted to take account of such rights issues. Since any adjustments will depend on individual circumstances, shareholders are advised to consult their professional advisors.

Capital gains As liability to capital gains tax on a disposal of WPP shares will depend on individual circumstances, shareholders are advised to consult their professional advisors.

WPP ANNUAL REPORT 2019 203 ADDITIONAL INFORMATION

FINANCIAL GLOSSARY

Term used in Annual Report United States’ equivalent or brief description

ADRs/ADSs American Depositary Receipts/American Depositary Shares. The Group uses the terms ADR and ADS interchangeably. One ADR/ADS represents five ordinary shares

Allotted Issued

Average net debt and net debt Average net debt is calculated as the average daily net borrowings of the Group. Net debt at a period end is calculated as the sum of the net borrowings of the Group, derived from the cash ledgers and accounts in the balance sheet. Net debt excludes lease liabilities

Billings Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the total of other fees earned

Called -up share capital Ordinary shares, issued and fully paid

Constant currency The Group uses US dollar-based, constant currency models to measure performance. These are calculated by applying budgeted 2019 exchange rates to local currency reported results for the current and prior year. This gives a US dollar-denominated income statement which excludes any variances attributable to foreign exchange rate movements

ESOP Employee share ownership plan

Estimated net new billings Net new billings represent the estimated annualised impact on billings of new business gained from both existing and new clients, net of existing client business lost. The estimated impact is based upon initial assessments of the clients’ marketing budgets, which may not necessarily result in actual billings of the same amount

EURIBOR The euro area inter-bank offered rate for euro deposits

Finance lease Capital lease

Free cash flow Free cash flow is calculated as cash generated by operations plus dividends received from associates, interest received, investment income received, and proceeds from the issue of shares, less corporation and overseas tax paid, interest and similar charges paid, dividends paid to non-controlling interests in subsidiary undertakings, repayment of lease liabilities (including interest), earnout payments and purchases of property, plant and equipment and purchases of other intangible assets

Freehold Ownership with absolute rights in perpetuity

General and administrative costs General and administrative costs include marketing costs, certain professional fees and an allocation of other costs, including staff and establishment costs, based on the function of employees within the Group

Headline earnings Headline PBT less headline tax charge and non-controlling interests

Headline EBITDA Profit before finance income/costs and revaluation of financial instruments, taxation, gains/ losses on disposal of investments and subsidiaries, investment write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, amortisation of other intangibles, depreciation of property, plant and equipment, depreciation of right-of-use assets, restructuring and transformation costs, litigation settlement, gain on sale of freehold property in New York, share of exceptional gains/losses of associates and gains/losses on remeasurement of equity interests arising from a change in scope of ownership

Headline operating profit Operating profit before gains/losses on disposal of investments and subsidiaries, investment write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, litigation settlement, gain on sale of freehold property in New York and gains/losses on remeasurement of equity interests arising from a change in scope of ownership

Headline operating profit margin Headline operating profit margin is calculated as headline operating profit (defined above) as a percentage of revenue less pass-through costs.

Headline PBIT Profit before finance income/costs and revaluation of financial instruments, taxation, gains/ losses on disposal of investments and subsidiaries, investment write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, litigation settlement, gain on sale of freehold property in New York, share of exceptional gains/losses of associates and gains/losses on remeasurement of equity interests arising from a change in scope of ownership

Headline PBT Profit before taxation, gains/losses on disposal of investments and subsidiaries, investment write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, restructuring and transformation costs, litigation settlement, gain on sale of freehold property in New York, share of exceptional gains/losses of associates, gains/losses arising from the revaluation of financial instruments and gains/losses on remeasurement of equity interests arising from a change in scope of ownership

204 WPP ANNUAL REPORT 2019 FINANCIAL GLOSSARY ADDITIONAL INFORMATION

Term used in Annual Report United States’ equivalent or brief description

Headline tax charge Taxation excluding tax/deferred tax relating to gains on disposal of investments and subsidiaries, tax credit relating to gain on sale of freehold property in New York, tax charge relating to litigation settlement, deferred tax impact of the amortisation of acquired intangible assets and other goodwill items, the tax impact of the 2017 United States’ tax reform and tax credit relating to restructuring and transformation costs

IFRS/IAS International Financial Reporting Standard/International Accounting Standard

LIBOR The London inter-bank offered rate

Net working capital The movement in net working capital consists of movements in trade working capital and movements in other working capital and provisions per the analysis of cash flows note

OCI Consolidated statement of comprehensive income

Pass -through costs Pass-through costs comprise fees paid to external suppliers where they are engaged to perform part or all of a specific project and are charged directly to clients, predominantly media and data collection costs

Pro forma (“like-for-like”) Pro forma comparisons are calculated as follows: current year, constant currency actual results (which include acquisitions from the relevant date of completion) are compared with prior year, constant currency actual results, adjusted to include the results of acquisitions for the commensurate period in the prior year. The Group uses the terms “pro forma” and “like-for-like” interchangeably

Profit Income

Profit attributable to equity holders of the parent Net income

Revenue less pass-through costs Revenue less pass-through costs is revenue less media, data collection and other pass-through costs

Sarbanes-Oxley Act or SOX An Act passed in the United States to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes

Share capital Ordinary shares, capital stock or common stock issued and fully paid

Shares in issue Shares outstanding

Share premium account Additional paid-in capital or paid-in surplus (not distributable)

UK Corporate Governance Code The UK Corporate Governance Code published by the Financial Reporting Council dated April 2016

FORWARD-LOOKING STATEMENT In connection with the provisions of the Private Securities Litigation Reform Act of 1995 (the ‘Reform Act’), the Company may include forward-looking statements (as defined in the Reform Act) in oral or written public statements issued by or on behalf of the Company. These forward-looking statements may include, among other things, plans, objectives, projections and anticipated future economic performance based on assumptions and the like that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the forward-looking statements. Important factors which may cause actual results to differ include but are not limited to: the unanticipated loss of a material client or key personnel, delays or reductions in client advertising budgets, shifts in industry rates of compensation, regulatory compliance costs or litigation, natural disasters or acts of terrorism, the Company’s exposure to changes in the values of other major currencies (because a substantial portion of its revenues are derived and costs incurred outside of the UK) and the overall level of economic activity in the Company’s major markets (which varies depending on, among other things, regional, national and international political and economic conditions and government regulations in the world’s advertising markets). In addition, you should consider the risks described under the heading Principal risks on pages 85-91, which could also cause actual results to differ from forward‑looking information. In light of these and other uncertainties, the forward‑looking statements included in this document should not be regarded as a representation by the Company that the Company’s plans and objectives will be achieved. The Company undertakes no obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

WPP ANNUAL REPORT 2019 205 ADDITIONAL INFORMATION

WHERE TO FIND US

COMPANY CENTRES CONTACT POINTS WPP NEW YORK INVESTOR RELATIONS 3 World Trade Center John Rogers 175 Greenwich Street Chief Financial Officer Designate New York NY 10007 Tel +44 (0)20 7282 4600 Tel +1 (212) 632 2200 [email protected]

WPP LONDON Peregrine Riviere Sea Containers Group Investor Relations Director 18 Upper Ground London London SE1 9GL Tel +44 (0)20 7282 4600 Tel +44 (0)20 7282 4600 [email protected]

WPP ASIA PACIFIC Fran Butera 50 Scotts Road Investor Relations Director Singapore 228242 New York Tel +65 6508 5219 Tel +1 (212) 632 2235 [email protected] COMPANY INFORMATION If you would like further general information about WPP, its INVESTOR INFORMATION companies or any of the programmes or initiatives mentioned in this Investor relations material and our financial statements are available Annual Report, please visit our website, wpp.com, or email: online at wpp.com/investors [email protected] CORPORATE COMMUNICATIONS BUSINESS DEVELOPMENT AND MEDIA RELATIONS For more about WPP companies’ professional services, Chris Wade please contact: Chief Communications Officer Jason Day Tel +44 (0)20 7282 4600 [email protected] [email protected]

EMEA Niken Wresniwiro Tel +44 (0)20 7282 4600 [email protected]

NORTH AMERICA Kevin McCormack Tel +1 (212) 632 2200 [email protected]

ASIA PACIFIC Juliana Yeh Tel +852 2280 3790 [email protected]

SUSTAINABILITY Andrea Harris Tel +44 (0)20 7282 4600 [email protected]

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206 WPP ANNUAL REPORT 2019 WPP AT DREAMFORCE 2019 Dreamforce is Salesforce’s flagship annual event that brings over 170,000 industry leaders together to collaborate, learn and inspire. As a first-time sponsor of the event in 2019, WPP came out strong with a beautiful activation that was inspired by our brand identity. “Living Art” was designed by WPP agency MJM and featured renowned artist Alexa Meade. Our creative, brand-inspired booth was recognised by Salesforce as a “Best in Show”. TO BE UPDATED